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What changed in Otter Tail Corp's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Otter Tail Corp's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+418 added−396 removedSource: 10-K (2026-02-18) vs 10-K (2025-02-19)

Top changes in Otter Tail Corp's 2025 10-K

418 paragraphs added · 396 removed · 291 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

115 edited+62 added−25 removed27 unchanged
Biggest changeOur mix of owned generation and wholesale market energy purchases to meet customer demand are impacted by wholesale energy prices and the relative cost of each energy source with wholesale market energy being utilized when it is determined to be beneficial to customers. 7 Table of Contents As of December 31, 2024, OTP’s wholly or jointly owned plants and facilities, as well as in place power purchase agreements, and their dependable kilowatt (kW) capacity were: Capacity / Purchased Power in kW Owned Generation: Baseload Plants Big Stone Plant (1) 264,700 Coyote Station (2) 151,200 Total Baseload Plants 415,900 Combustion Turbine and Small Diesel Units Astoria Station 288,800 Solway 50,000 All Other 77,900 Total Combustion Turbine and Small Diesel Units 416,700 Owned Wind Facilities (rated at nameplate) Merricourt 150,000 Ashtabula III 62,400 Luverne 49,500 Ashtabula 48,000 Langdon 40,500 Total Owned Wind Facilities 350,400 Hoot Lake Solar (rated at nameplate) 49,900 Hydroelectric Facilities 1,000 Total Owned Generation Capacity 1,233,900 Power Purchase Agreements: Purchased Wind Power (rated at nameplate and greater than 2,000 kW) Edgeley 21,000 Langdon 19,500 Total Purchased Wind 40,500 Total Generating Capacity 1,274,400 (1) Reflects OTP's 53.9% ownership percentage of jointly owned facility.
Biggest changeWholesale energy is used when it offers a benefit to customers. 7 Table of Contents As of December 31, 2025, OTP’s wholly or jointly owned plants and facilities, as well as in place power purchase agreements, and their nameplate capacity were: Capacity / Purchased Power in kW (Nameplate Rating) Owned Generation: Baseload Plants Big Stone Plant (1) 256,025 Coyote Station (2) 149,450 Total Baseload Plants 405,475 Combustion Turbine and Small Diesel Units Astoria Station 245,000 Solway 44,500 All Other 72,208 Total Combustion Turbine and Small Diesel Units 361,708 Owned Wind Facilities Merricourt 150,000 Ashtabula III 62,400 Luverne 49,500 Ashtabula 48,000 Langdon 40,500 Total Owned Wind Facilities 350,400 Hoot Lake Solar 49,900 Hydroelectric Facilities 3,870 Total Owned Generation Capacity 1,171,353 Power Purchase Agreements: Purchased Wind Power (greater than 2,000 kW) Edgeley 21,000 Langdon 19,500 Total Purchased Wind 40,500 Total Generating Capacity 1,211,853 (1) Reflects OTP's 53.9% ownership percentage of jointly owned facility.
Emerging Environmental Regulation Regional Haze Rule (RHR). The Environmental Protection Agency (EPA) adopted the RHR in an effort to improve visibility in national parks and wilderness areas.
Emerging Regulation Regional Haze Rule (RHR). The Environmental Protection Agency (EPA) adopted the RHR in an effort to improve visibility in national parks and wilderness areas.
We continue to review and evaluate the overall impact this regulation may have on our business, including potential impacts to our operating results, financial condition and liquidity. Climate Change and Greenhouse Gas Regulation Global climate change presents a significant energy and environmental policy challenge.
We continue to review and evaluate the overall impact this regulation may have on our business, including potential impacts on our operating results, financial condition and liquidity. Climate Change and Greenhouse Gas Regulation Global climate change presents a significant energy and environmental policy challenge.
Renewable Energy Standard Minnesota has adopted a renewable energy standard requiring utilities to generate or procure sufficient renewable generation such that the following percentages of total retail electric sales to Minnesota customers come from qualifying renewable sources: 25% by 2025 and 55% by 2035. Qualifying renewable sources are classified as wind, hydropower, hydrogen and certain biomass generation.
Renewable Energy Standard Minnesota has adopted a renewable energy standard requiring utilities to generate or procure sufficient renewable generation such that the following percentages of total retail electric sales to Minnesota customers come from qualifying renewable sources: 25% by 2025 and 55% by 2035. Qualifying renewable sources are classified as solar, wind, hydropower, hydrogen and certain biomass generation.
PVC pipe is manufactured through an extrusion process, during which PVC compound (a dry powder-like substance) is blended with other materials and introduced into an extrusion machine, where it is heated to a molten state and then forced through a sizing apparatus to produce the pipe.
PVC pipe is manufactured through an extrusion process, during which PVC resin compound (a dry powder-like substance) is blended with other materials and introduced into an extrusion machine, where it is heated to a molten state and then forced through a sizing apparatus to produce the pipe.
As of December 31, 2024, we were the sole or joint owner of approximately 14,000 miles of transmission and distribution lines. Midcontinent Independent System Operator MISO is an independent, non-profit organization that operates the transmission facilities owned by other entities, including OTP, within its regional jurisdiction and administers energy and generation capacity markets.
As of December 31, 2025, we were the sole or joint owner of approximately 14,000 miles of transmission and distribution lines. Midcontinent Independent System Operator MISO is an independent, non-profit organization that operates the transmission facilities owned by other entities, including OTP, within its regional jurisdiction and administers energy and generation capacity markets.
Plastics) Vinyltech Corporation (Vinyltech) Electric includes the generation, purchase, transmission, distribution and sale of electric energy in western Minnesota, eastern North Dakota and northeastern South Dakota. Otter Tail Power (OTP), our primary business since 1907, serves approximately 134,000 customers in more than 400 communities across a predominantly rural and agricultural service territory.
Plastics) Vinyltech Corporation (Vinyltech) Electric includes the generation, purchase, transmission, distribution and sale of electric energy in western Minnesota, eastern North Dakota and northeastern South Dakota. Otter Tail Power (OTP), our primary business, serves approximately 134,000 customers in more than 400 communities across a predominantly rural and agricultural service territory.
The following table summarizes these recovery mechanisms: Recovery Mechanism Jurisdiction(s) Additional Information Fuel Clause Adjustment (FCA) MN, ND, SD Provides for periodic billing adjustments for changes in prudently incurred costs of fuel and purchased power. In North and South Dakota, fuel and purchased power costs are generally adjusted on a monthly basis.
The following table summarizes the significant recovery mechanisms: Recovery Mechanism Jurisdiction(s) Additional Information Fuel Clause Adjustment (FCA) MN, ND, SD Provides for periodic billing adjustments for changes in prudently incurred costs of fuel and purchased power. In North and South Dakota, fuel and purchased power costs are generally adjusted on a monthly basis.
In addition, the FERC has established a competitive process for the construction and operation of certain new electric transmission facilities under federal regulation. Certain states, including the three states in our service territory, have laws which provide the incumbent transmission owner the right of first refusal to construct and own new transmission facilities.
In addition, the FERC has established a competitive process for the construction and operation of certain new electric transmission facilities under federal regulations. Certain states, including the three states in our service territory, have laws which provide the incumbent transmission owner the right of first refusal to construct and own new transmission facilities.
This project is in the initial stages of planning and development and is expected to be completed in 2032. Maple River-Cuyuna includes the construction of a new 345 kV transmission line in eastern North Dakota and western Minnesota, as well as investment in substation expansion.
This project is in the initial stages of development and is expected to be completed in 2032. Maple River-Cuyuna includes the construction of a new 345 kV transmission line in eastern North Dakota and western Minnesota, as well as investment in substation expansion. This project is in the initial stages of development and is expected to be completed in 2033.
Our actual mix of earnings for the years ended December 31, 2024 and 2023 along with an historical average and long-term expectation are shown below: HUMAN CAPITAL Our employees are a critical resource for our business and an integral part of our success.
Our actual mix of earnings for the years ended December 31, 2025 and 2024 along with an historical average and long-term expectation are shown below: HUMAN CAPITAL Our employees are a critical resource for our business and an integral part of our success.
Compliance with North American Electric Reliability Corporation (NERC) reliability standards, including standards on cybersecurity and protection of critical infrastructure. In addition to base rates, which are established through periodic rate case proceedings within each state jurisdiction, there are other mechanisms for recovery of our capital investments and operating costs between rate cases.
Compliance with North American Electric Reliability Corporation (NERC) reliability standards, including standards on cybersecurity and protection of critical infrastructure. 12 Table of Contents In addition to base rates, which are established through periodic rate case proceedings within each state jurisdiction, there are other mechanisms for recovery of our capital investments and operating costs between rate cases.
Transmission Cost Recovery Rider (TCR) MN, ND, SD Provides for the recovery of costs outside of a general rate case for investments in new or modified electric transmission assets and certain MISO transmission service and related costs.
Transmission Cost Recovery Rider (TCR) MN, ND, SD Provides for the recovery of costs outside of a general rate case for investments in new or modified electric transmission assets and certain MISO transmission services and related costs.
Future changes to the laws which provide for the right of first refusal could impact the competitive conditions related to the construction of new transmission facilities. OTP has franchises to operate as an electric utility in substantially all of the incorporated municipalities it serves. Franchise rights generally require periodic renewal.
Future changes or legal challenges to the laws which provide for the right of first refusal could impact the competitive conditions related to the construction of new transmission facilities. OTP has franchises to operate as an electric utility in substantially all of the incorporated municipalities it serves. Franchise rights generally require periodic renewal.
For a public utility with between 50,000 and 200,000 retail electric customers, such as OTP, at least 10% of the 1.5% requirement must be met by solar energy generated by or procured from solar photovoltaic devices with a nameplate capacity of 40 kW or less.
For a public utility with between 50,000 and 200,000 retail electric customers, such as OTP, at least 10% of the 1.5% requirement must be met by 13 Table of Contents solar energy generated by or procured from solar photovoltaic devices with a nameplate capacity of 40 kW or less.
Within this second tranche of projects, we anticipate OTP will be a partial owner of three projects, including a new 345 kV transmission line, a new 765 kV transmission line, and the addition of a second circuit to an existing 345 kV transmission line.
Within this second tranche of projects, OTP will be a partial owner of three projects, including the addition of a second circuit to an existing 345 kV transmission line, a new 345 kV transmission line, and a new 765 kV transmission line.
In addition to competition with other PVC pipe manufacturers, our PVC pipe competes with other products that serve the same end markets, including ductile iron, high-density polyethylene (HDPE), steel and concrete pipe products.
In addition to competition with other PVC pipe manufacturers, our PVC pipe products compete with other products that serve the same end markets, including ductile iron, high-density polyethylene (HDPE), steel and concrete pipe products.
ITEM 1. BUSINESS Otter Tail Corporation (OTC) is a holding company which has strategically invested in a portfolio of diversified operations including an electric utility and manufacturing and plastic pipe businesses with corporate offices located in Fergus Falls, Minnesota and Fargo, North Dakota.
ITEM 1. BUSINESS Otter Tail Corporation (OTC) is a holding company which has strategically invested in a portfolio of diversified operations including an electric utility and manufacturing and plastic pipe businesses. Our corporate offices are located in Fergus Falls, Minnesota and Fargo, North Dakota.
We expect our earnings growth and cash flow generation to be driven by rate base investments in our Electric segment and from existing capacities and recent investments within our Manufacturing and Plastics segments.
We expect our earnings growth and cash flow generation to be driven by rate base investments in our Electric segment and from recent investments within our Manufacturing and Plastics segments.
ELECTRIC Contribution to Operating Revenues: 39% (2024), 39% (2023), 38% (2022) OTP, headquartered in Fergus Falls, Minnesota, is a vertically integrated, regulated utility with generation, transmission and distribution facilities to serve its approximately 134,000 residential, commercial and industrial customers in a service area encompassing approximately 70,000 square miles of western Minnesota, eastern North Dakota and northeastern South Dakota.
ELECTRIC Contribution to Operating Revenues: 43% (2025), 39% (2024), 39% (2023) OTP, headquartered in Fergus Falls, Minnesota, is a vertically integrated, regulated utility with generation, transmission and distribution facilities to serve its approximately 134,000 residential, commercial and industrial customers in a service area encompassing approximately 70,000 square miles of western Minnesota, eastern North Dakota and northeastern South Dakota.
An IRP is a set of resource options a utility could use to meet the service needs of its customers over the forecast period, including an explanation of the utility’s supply and demand circumstances, and the extent to 12 Table of Contents which each resource option would be used to meet those service needs.
An IRP is a set of resource options a utility could use to meet the service needs of its customers over the forecast period, including an explanation of the utility’s supply and demand circumstances, and the extent to which each resource option would be used to meet those service needs.
The implementation of climate change programs, such as the Minnesota Clean Energy Law, regulations under the Clean Air Act and other existing or future federal or state regulations targeting GHG emissions, may have a significant impact on our utility business.
The implementation of climate change programs, such as the Minnesota Clean Energy Law, regulations under the Clean Air Act, if not repealed, and other existing or future federal or state regulations targeting GHG emissions, may have a significant impact on our utility business.
Specific to Coyote Station, the EPA found that North Dakota relied on non-statutory visibility modeling to reject the installation of additional nitrogen oxides (NOx) and sulfur dioxide (SO 2 ) emission controls. Having disapproved, in part, the North Dakota SIP, the EPA now must promulgate a Federal Implementation Plan within two years from the issuance of its final decision.
Specific to Coyote Station, the EPA found that North Dakota relied on non-statutory visibility modeling to reject the installation of additional nitrogen oxides and sulfur dioxide emission controls. Having disapproved, in part, the North Dakota SIP, the EPA must promulgate a Federal Implementation Plan within two years from the issuance of its final decision.
PLASTICS Contribution to Operating Revenues: 35% (2024), 31% (2023), 35% (2022) Our Plastics businesses produce PVC pipe at plants in North Dakota and Arizona. The following is a brief description of these businesses: Northern Pipe Products, Inc.
PLASTICS Contribution to Operating Revenues: 32% (2025), 35% (2024), 31% (2023) Our Plastics businesses produce PVC pipe at plants in North Dakota and Arizona. The following is a brief description of these businesses: Northern Pipe Products, Inc.
CUSTOMERS Our service territory is predominantly rural and agricultural and includes over 400 communities, most of which have populations of less than 10,000. While our customer base includes relatively few large customers, sales to commercial and industrial customers are significant and in 2024 two customers combined accounted for 19% of segment operating revenues.
CUSTOMERS Our service territory is predominantly rural and agricultural and includes over 400 communities, most of which have populations of less than 10,000. While our customer base includes relatively few large customers, sales to commercial and industrial customers are significant and in 2025 two customers combined accounted for 16% of segment operating revenues.
Human Rights - We are committed to the protection of our employee’s freedom of expression and freedom of organization and assembly. Inclusive Workplace - We hold every employee accountable for their behavior in maintaining a workplace free of discrimination and harassment.
Human Rights - We are committed to the protection of our employee’s freedom of expression and freedom of organization and assembly. 5 Table of Contents Inclusive Workplace - We hold every employee accountable for their behavior in maintaining a workplace free of discrimination and harassment.
MISO has operational control of our transmission facilities above 100 kilovolts (kV). MISO seeks to optimize the efficiency of the interconnected system, provide solutions to regional planning needs and minimize risk to reliability through its security coordination, long-term regional planning, market monitoring, scheduling and tariff administration functions. Transmission Additions MISO Tranche 1.0.
MISO has operational control of our transmission facilities above 100 kilovolts (kV). MISO seeks to optimize the efficiency of the interconnected system, provide solutions to regional planning needs and minimize risk to reliability through its security coordination, long-term regional planning, market monitoring, scheduling and tariff administration functions.
ENVIRONMENTAL REGULATION Our plastics businesses are subject to environmental, health and safety laws and regulations, including those governing discharges to air and water, the management and disposal of hazardous substances, the cleanup of contaminated sites and health and safety matters. 18 Table of Contents
ENVIRONMENTAL REGULATION Our plastics businesses are subject to environmental, health and safety laws and regulations including those governing discharges to air and water, the management and disposal of hazardous substances, the cleanup of contaminated sites and health and safety matters.
Coal Combustion Residual (CCR) Regulation. In May 2024, the EPA published a final rule amending CCR regulations, which introduce new requirements for the management of coal ash at active coal-fired power plants and inactive coal-fired power plants with a legacy surface impoundment. The regulations impose new requirements including groundwater monitoring, closure standards, post-closure care obligations and potential remediation activities.
In May 2024, the EPA published a final rule amending CCR regulations, which introduced new requirements for the management of coal ash at active coal-fired power plants and inactive coal-fired power plants with a legacy surface impoundment. The regulations impose new requirements including groundwater monitoring, closure standards, post-closure care obligations and potential remediation activities.
The following charts summarize the percentage of our generating capacity by source, including owned and jointly owned facilities and through power purchase arrangements, as of December 31, 2024 and 2023: Under the Midcontinent Independent System Operator (MISO) requirements, OTP is required to provide sufficient capacity through wholly or jointly owned generating capacity or power purchase agreements to meet its monthly weather-normalized forecast demand, plus a reserve obligation.
The following charts summarize the percentage of our nameplate capacity by source, including owned and jointly owned facilities and through power purchase arrangements, as of December 31, 2025 and 2024: 8 Table of Contents Under the Midcontinent Independent System Operator (MISO) requirements, OTP is required to provide sufficient capacity through wholly or jointly owned generating capacity or power purchase agreements to meet its monthly weather-normalized forecast demand, plus a reserve obligation.
For existing coal-fired power plants anticipated to be operated after January 2032 but plan to cease operations before January 2039, the regulation set a BSER of 40% co-firing with natural gas, which would result in a 16% reduction in CO 2 emissions rate with a compliance date of January 2030.
For existing 14 Table of Contents coal-fired power plants anticipated to be operated after January 2032 but planned to cease operations before January 2039, the regulation set a BSER of 40% co-firing with natural gas, which would result in a 16% reduction in CO 2 emissions rate with a compliance date of January 2030.
We have implemented education initiatives for all employees, aimed at inclusive leadership and a respectful workplace. 5 Table of Contents Code of Business Ethics - We require employees to complete training on several topics associated with our code of business ethics to reinforce our commitment to compliance with laws, regulations and values that guide who we are and how we do business.
We have implemented educational initiatives for all employees aimed at inclusive leadership and a respectful workplace. Code of Business Ethics - We require employees to complete training on several topics associated with our code of business ethics to reinforce our commitment to compliance with laws, regulations and values that guide who we are and how we do business.
Resource Planning Under Minnesota law, utilities are required to submit for approval by the Minnesota Public Utilities Commission (MPUC) a 15-year advance Integrated Resource Plan (IRP).
Resource Planning Under Minnesota law, utilities are required to submit for approval by the Minnesota Public Utilities Commission (MPUC) a 15-year advance Integrated Resource Plan (IRP) every two years.
Since 2021, our earnings mix has diverged from our long-term target of 65% from our Electric segment and 35% from our Manufacturing Platform and our earnings growth rate has exceeded our long-term targeted growth rate primarily due to market conditions within the PVC pipe industry.
Since 2021, our earnings mix has diverged from our long-term target of 70% from our Electric segment and 30% from our Manufacturing Platform and our earnings growth rate has exceeded our long-term targeted growth rate primarily due to market conditions within the PVC pipe industry.
The newly extruded pipe is pulled through a series of water-cooling tanks, marked to identify the type of pipe and cut to finished lengths. We produce pipe in a variety of diameters ranging from 3/4" to 24" and in varying lengths, generally from 10 feet to 20 feet.
The newly extruded pipe is pulled through a series of water-cooling tanks, marked to identify the type of pipe and cut to finished lengths. We produce pipe in a variety of diameters ranging from 3/4" to 24" and in varying lengths, generally from 10 feet to 20 feet, and up to 45 feet for certain types of pipe.
New cases are reported and evaluated for corrective action during monthly safety meetings attended by safety professionals at all locations. Our 2024 Total Recordable Incident Rate was 1.64, compared to 1.70 in 2023 and our Lost Time Incident Rate was 0.16 in 2024, compared to 0.53 in 2023.
New cases are reported and evaluated for corrective action during monthly safety meetings attended by safety professionals at all locations. Our 2025 Total Recordable Incident Rate was 1.60, compared to 1.64 in 2024 and our Lost Time Incident Rate was 0.52 in 2025, compared to 0.16 in 2024.
The following table presents our average retail rate per kilowatt-hour (kwh) by customer class and in total for the years ended December 31, 2024 and 2023: Revenue per kwh 2024 2023 Residential 11.38 ¢ 10.82 ¢ Commercial & Industrial 7.03 ¢ 7.02 ¢ Total Retail 7.98 ¢ 7.90 ¢ Wholesale electricity markets are competitive under the Federal Energy Regulatory Commission (FERC) open access transmission tariffs, which require utilities to provide nondiscriminatory access to all wholesale users.
The following table presents our average retail rate per kilowatt-hour (kwh) by customer class and in total for the years ended December 31, 2025 and 2024: Revenue per kwh 2025 2024 Residential 11.23 ¢ 11.38 ¢ Commercial & Industrial 7.27 ¢ 7.03 ¢ Total Retail 8.18 ¢ 7.98 ¢ Wholesale electricity markets are competitive under the Federal Energy Regulatory Commission (FERC) open access transmission tariffs, which require utilities to provide nondiscriminatory access to all wholesale users.
Our long-term financial objectives include achieving a compounded annual growth rate in earnings per share in the range of 6 to 8%, with a long-term earnings mix of approximately 65% from our Electric segment and 35% from our Manufacturing Platform. We also are targeting an annual increase in our dividend to be in the range of 6 to 8%.
Our long-term financial objectives include achieving a compounded annual growth rate in earnings per share in the range of 7 to 9%, with a long-term earnings mix target of approximately 70% from our Electric segment and 30% from our Manufacturing Platform. We also are targeting an annual increase in our dividend to be in the range of 6 to 8%.
MANUFACTURING Contribution to Operating Revenues: 26% (2024), 30% (2023), 27% (2022) Our Manufacturing businesses are engaged in the production of metal or plastics products sold to commercial customers. The following is a brief description of each of these businesses: BTD Manufacturing, Inc.
MANUFACTURING Contribution to Operating Revenues: 24% (2025), 26% (2024), 30% (2023) Our Manufacturing businesses are engaged in the production of metal or plastics parts and products sold to commercial customers. The following is a brief description of each of these businesses: BTD Manufacturing, Inc.
The second RHR implementation period covers the years 2018-2028. Coyote Station, OTP's jointly owned coal-fired power plant in North Dakota, is subject to assessment in the second implementation period under the North Dakota SIP. The North Dakota Department of Environmental Quality (NDDEQ) submitted its SIP to the EPA in August 2022.
RHR compliance is to be monitored through several implementation periods, the second of which covers the years 2018-2028. Coyote Station, OTP's jointly owned coal-fired power plant in North Dakota, is subject to assessment in the second implementation period under the North Dakota SIP. The North Dakota Department of Environmental Quality (NDDEQ) submitted its SIP to the EPA in August 2022.
Irrespective of the competitive environment, we are focused on providing value to our customers and ensuring our retail rates remain among the lowest in the region and in the nation. In 2024, our summer residential rates were 16% below the regional average and 30% below the national average.
Irrespective of the competitive environment, we are focused on providing value to our customers and ensuring our retail rates remain among the lowest in the region and in the nation. In 2025, our summer residential rates were 19% below the regional average and 34% below the national average.
Financial Impacts For the five-year period ended December 31, 2024, OTP invested approximately $4.8 million in environmental control equipment, including $1.7 million in 2024. Our capital budget for the next five years includes approximately $9.0 million of capital investments in environmental control equipment. The timing and amount of our expenditures may change as the regulatory environment changes.
Financial Impacts For the five-year period ended December 31, 2025, OTP invested approximately $6.3 million in environmental control equipment, including $1.9 million in 2025. Our capital budget for the next five years includes approximately $9.3 million of capital investments in environmental control equipment. The timing and amount of our expenditures may change as the regulatory environment changes.
Regarding the partial disapproval, the EPA found that North Dakota failed to submit a long- 13 Table of Contents term strategy that includes enforceable emissions limitations, compliance schedules, and other measures necessary to make reasonable progress on national visibility goals.
As part of its partial disapproval, the EPA found that North Dakota failed to submit a long-term strategy that includes enforceable emissions limitations, compliance schedules and other measures necessary to make reasonable progress on national visibility goals.
This project is in the initial stages of planning and development and is expected to be completed in 2033. Big Stone South-Brookings County includes the construction of a new 765 kV transmission line in eastern South Dakota, as well as investment in substation expansion.
Big Stone South-Brookings County includes the construction of a new 765 kV transmission line in eastern South Dakota, as well as investment in substation expansion. This project is in the initial stages of development and is expected to be completed in 2034. Joint Targeted Interconnection Queue (JTIQ).
Carbon-free resources include wind, solar, hydropower and nuclear generation. To provide flexibility, the law allows electric utilities to use RECs to offset carbon emissions and for the MPUC to consider whether a regulated utility's requirement to meet established standards should be delayed due to affordability or reliability impacts.
To provide flexibility, the law allows electric utilities to use RECs to offset carbon emissions and for the MPUC to consider whether a regulated utility's requirement to meet established standards should be delayed due to affordability or reliability impacts.
(Northern Pipe) , located in Fargo, North Dakota, manufactures and sells PVC pipe for municipal water, rural water, wastewater, storm drainage systems and other uses in the northern, midwestern, south-central and western regions of the United States as well as central and western Canada.
(Northern Pipe) , founded in 1979 and acquired by Otter Tail Corporation in 1995, located in Fargo, North Dakota, manufactures and sells PVC pipe for municipal water, rural water, wastewater, storm drainage systems and other uses in the northern, midwestern, south-central and western regions of the United States as well as central and western Canada.
The Minnesota Clean Energy Law, passed in 2023, requires electric utilities to generate or procure sufficient electricity from carbon-free resources to provide retail customers in Minnesota with at least the following percentages of carbon-free electric energy: 80% by 2030, 90% by 2035, and 100% by 2040.
Minnesota Clean Energy Law Minnesota's Clean Energy Law requires electric utilities to generate or procure sufficient electricity from carbon-free resources to provide retail customers in Minnesota with at least the following percentages of carbon-free electric energy: 80% by 2030, 90% by 2035, and 100% by 2040. Carbon-free resources include wind, solar, hydropower and nuclear generation.
Vinyltech Corporation (Vinyltech) , located in Phoenix, Arizona, manufactures and sells PVC pipe for municipal water, wastewater, water reclamation systems and other uses in the western, northwest and south-central regions of the United States.
Vinyltech Corporation (Vinyltech) , founded in 1983 and acquired by Otter Tail Corporation in 2000, located in Phoenix, Arizona, manufactures and sells PVC pipe for municipal water, wastewater, water reclamation systems and other uses in the western, northwest and south-central regions of the United States.
The supply agreement between the Coyote Station owners, including OTP, and the coal supplier includes provisions requiring the Coyote Station owners to purchase the membership interests and pay off or assume loan and lease obligations of the coal supplier, as well as complete mine closing and post-mining reclamation, in the event of certain early termination events and at the expiration of the coal supply agreement in 2040.
The supply agreement between the Coyote Station owners, including OTP, and the coal supplier includes provisions requiring the Coyote Station owners to purchase the membership interests and pay off or assume loan and lease obligations of the coal supplier, as well as complete mine closing and post-mining reclamation.
For existing coal-fired power plants, the applicable subcategory is based upon the date at which the plant will cease operations. For existing coal-fired power plants anticipated to be operated after January 2039, the regulation set a Best System of Emission Reduction (BSER) based on 90% capture and sequestration of CO 2 emissions with a compliance date of January 2032.
For existing coal-fired power plants anticipated to be operated after January 2039, the regulation set a Best System of Emission Reduction (BSER) based on 90% capture and sequestration of CO 2 emissions with a compliance date of January 2032.
Combustion of fossil fuels for the generation of electricity is a considerable source of CO 2 emissions, which is the primary GHG emitted by our utility operations. The federal government, many states and international organizations are pursuing climate policies to regulate GHG emissions as part of a broad-based effort to limit global warming.
Combustion of fossil fuels for the generation of electricity is a considerable source of CO 2 emissions, which is the primary GHG emitted by our utility operations. The federal government, state governments and international organizations have periodically pursued, and may continue to pursue, climate policies to regulate GHG emissions as part of a broad-based effort to limit global warming.
Decisions by our regulators significantly impact our operating results, financial position and cash flows. 11 Table of Contents Below is a summary of the regulatory agencies with jurisdiction over OTP covered by each regulatory agency: Regulatory Agency Areas of Regulation Minnesota Public Utilities Commission (MPUC) Retail rates, issuance of securities, depreciation rates, capital structure, public utility services, construction of major facilities, establishment of exclusive assigned service areas, contracts with subsidiaries and other affiliated interests and other matters.
Below is a summary of the regulatory agencies with jurisdiction over OTP and the areas of regulation covered by each agency: Regulatory Agency Areas of Regulation Minnesota Public Utilities Commission (MPUC) Retail rates, issuance of securities, depreciation rates, capital structure, public utility services, construction of major facilities, establishment of exclusive assigned service areas, contracts with subsidiaries and other affiliated interests and other matters.
In addition to PVC resin, we use certain other materials, such as stabilizers, waxes, gaskets and lumber, in the process of manufacturing and shipping our PVC pipe products.
In addition to PVC resin, we use certain other materials, such as stabilizers, waxes, gaskets and lumber, in the process of manufacturing and shipping our PVC pipe products. We generally source these materials from a limited number of suppliers.
The following charts summarize our retail electric revenues by state and by customer segment for the years ended December 31, 2024 and 2023: In addition to retail revenue, our Electric segment also generates operating revenues from the transmission of electricity for others over the transmission assets we wholly or jointly own with other transmission service providers, and from the sale of electricity we generate and sell into the wholesale electricity market. 6 Table of Contents COMPETITIVE CONDITIONS Retail electric sales are made to customers in assigned service territories.
The following charts summarize our retail electric revenues by state and by customer segment for the years ended December 31, 2025 and 2024: 6 Table of Contents In addition to retail revenues, our Electric segment also generates operating revenues from the transmission of electricity for others over the transmission assets we wholly or jointly own, and from the sale of electricity we generate and sell into the wholesale electricity market.
As of December 31, 2024, we employed 2,133 full-time employees as shown in the table below: Segment/Organization Employees Electric Segment OTP (1) 798 Manufacturing Segment BTD 960 T.O.
As of December 31, 2025, we employed 2,198 full-time employees as shown in the table below: Segment/Organization Employees Electric Segment OTP (1) 726 Manufacturing Segment BTD 1,075 T.O.
Coal-fired power plants with federally enforceable plans to cease operations by January 2032 are not subject to this regulation. Several states and industry groups have filed lawsuits challenging the new regulation, arguing the EPA has overstepped its authority under the Clean Air Act. We continue to review and evaluate the final regulations and the ongoing legal challenges.
Coal-fired power plants with federally enforceable plans to cease operations by January 2032 are not subject to this regulation. Following the issuance of the new regulations, several states and industry groups filed lawsuits challenging the regulation, arguing the EPA overstepped its authority under the Clean Air Act.
Plastics 162 Segment Total 1,122 Plastics Segment Northern Pipe 93 Vinyltech 82 Segment Total 175 Corporate 38 Total 2,133 (1) Includes all full-time employees of Otter Tail Power Company, including employees working at jointly owned facilities. Labor costs associated with employees working at jointly owned facilities are allocated to each of the co-owners based on their ownership interest.
Plastics 160 Segment Total 1,235 Plastics Segment Northern Pipe 106 Vinyltech 94 Segment Total 200 Corporate 37 Total 2,198 (1) Includes all full-time employees of Otter Tail Power Company, including employees working at jointly owned facilities. Labor costs associated with employees working at jointly owned facilities are allocated to each of the co-owners based on their ownership interest.
Tariff rates are designed to recover plant investments, a return on those investments and operating costs. In addition to determining rate tariffs, state regulatory commissions also authorize return on equity (ROE), capital structure and depreciation rates of our capital investments.
Tariff rates are designed to recover plant investments, a return on those investments and operating costs. In addition to determining rate tariffs, state regulatory commissions also authorize return on equity (ROE), capital structure 11 Table of Contents and depreciation rates of our capital investments. Decisions by our regulators significantly impact our operating results, financial position and cash flows.
MISO operates under a seasonal resource adequacy construct in which generation resources are accredited and planning reserve margin requirements are implemented on a seasonal basis.
MISO operates under a seasonal resource adequacy construct in which generation resources are accredited and planning reserve margin requirements are implemented on a seasonal basis. Current planning reserve margin requirements range between 7.9% and 25.3%, depending on the season.
These projects will improve reliability and resolve constraints in the transmission system to allow for up to 30 gigawatts of new generation to be added to the system.
These projects will improve reliability and resolve constraints in the transmission system to allow for up to 30 gigawatts of new generation to be added to the system. Bison-Hankinson-Big Stone South is a two-part new transmission line project.
We procure natural gas from multiple vendors at spot prices in a liquid market primarily under firm delivery contracts. TRANSMISSION AND DISTRIBUTION Our transmission and distribution assets deliver energy from energy generation sources to our customers. In addition, we earn revenue from the transmission of electricity over our wholly or jointly owned transmission assets for others under approved rate tariffs.
TRANSMISSION AND DISTRIBUTION Our transmission and distribution assets deliver energy from energy generation sources to our customers. In addition, we earn revenue from the transmission of electricity over our wholly or jointly owned transmission assets for others under approved rate tariffs.
In October 2024, we entered into a purchase agreement to acquire the development assets of the project, including approximately 3,400 acres of land, interconnection agreements, state and local permits, and all other assets of the project.
In October 2024, we entered into a purchase agreement to acquire the development assets of the project, including approximately 3,400 acres of land, interconnection agreements, state and local permits, and all other assets of the project. The acquisition of these assets was completed in January 2026, and we currently estimate the facility will be operational by the end of 2028.
The amounts include energy generated from owned resources, procured through power purchase agreements and energy purchased in the wholesale market: RESOURCE MATERIALS Coal is the principal fuel burned at our jointly owned Big Stone and Coyote Station generating plants. Coyote Station, a mine-mouth facility, burns North Dakota lignite coal. Big Stone Plant burns western subbituminous coal.
RESOURCE MATERIALS Coal is the principal fuel burned at our jointly owned Big Stone Plant and Coyote Station generating plants. Coyote Station, a mine-mouth facility, burns North Dakota lignite coal. Big Stone Plant burns western subbituminous coal.
We met the current solar requirement with a combination of owned solar generation and solar renewable energy certificate (REC) purchases. We plan to comply with the requirements of this standard in the future through a combination of our existing and projected renewable generation fleet.
We met the current renewable sources requirements with a combination of owned renewable generation and purchases from renewable generation sources. We were in compliance with the 2025 target established by the standard, and we plan to comply with the future requirements of this standard through a combination of our existing and projected renewable generation fleet.
We will continue to compete based on our high level of service quality, including being a responsive and reliable partner to our customers, through maintaining product availability, by producing high-quality products and using cost-effective production techniques.
We will continue to compete based on our high level of service and quality, including being a responsive and reliable partner to our customers through maintaining product availability, by producing high-quality products and by using cost-effective production techniques. RESOURCE MATERIALS There are four domestic manufacturers of PVC resin, the primary material input used in the manufacturing of PVC pipe.
As a result, most retail customers do not have the ability to choose their electric supplier. Competition is present in some areas from municipally owned systems, rural electric cooperatives and, in certain respects, from on-site generators and co-generators. Electricity also competes with other forms of energy.
Competition is present in some areas from municipally owned systems, rural electric cooperatives and, in certain respects, from on-site generators and co-generators. Electricity also competes with other forms of energy.
Big Stone South-Alexandria-Big Oaks includes the construction of a new 345 kV transmission line in eastern South Dakota and western Minnesota and the addition of a second circuit to an existing 345 kV line in central Minnesota. The new transmission 10 Table of Contents line will span approximately 100 miles between Big Stone, South Dakota and Alexandria, Minnesota.
The project is expected to be completed in 2029. Big Stone South-Alexandria-Big Oaks includes the construction of a new 345 kV transmission line in eastern South Dakota and western Minnesota and the addition of a second circuit to an existing 345 kV line in central Minnesota.
Plastics consists of businesses producing polyvinyl chloride (PVC) pipe at plants in North Dakota and Arizona. The PVC pipe is sold primarily in the western half of the United States and Canada. Throughout the remainder of this report, we use the terms "Company," "us," "our," or "we" to refer to OTC and its subsidiaries collectively.
The PVC pipe is sold primarily in the western half of the United States and Canada. Throughout the remainder of this report, we use the terms "Company," "us," "our," or "we" to refer to OTC and its subsidiaries collectively. We also refer to our Electric, Manufacturing and Plastics segments and our individual subsidiaries as indicated above.
Approval of site and routes for new electric generating facilities (>500 kW for wind generating facilities; >50,000 kW for non-wind generating facilities) and high voltage transmission lines (>115 kV). Review and approval of fifteen-year Integrated Resource Plan. South Dakota Public Utilities Commission (SDPUC) Retail rates, public utility services, construction of major facilities, establishment of assigned service areas and other matters.
North Dakota Public Service Commission (NDPSC) Retail rates, certain issuances of securities, construction of major utility facilities and other matters. Approval of site and routes for new electric generating facilities (exceeding 500 kW for wind generating facilities; exceeding 50,000 kW for non-wind generating facilities) and high voltage transmission lines (exceeding 115 kV).
We will also evaluate opportunities to allocate capital to potential acquisitions. We are a committed long-term owner and do not acquire companies in pursuit of short-term gains.
We will also evaluate opportunities to allocate capital to 4 Table of Contents potential acquisitions. We are a committed long-term owner and do not acquire companies in pursuit of short-term gains. However, we will divest of businesses which no longer fit into our long-term strategy and risk profile.
We generally source these materials from a limited number of suppliers, and supply chain constraints or disruptions related to these materials could disrupt our ability to manufacture or ship products and could result in increased costs. 17 Table of Contents SEASONALITY Demand for our PVC pipe products can be impacted by seasonal weather differences, with generally lower sales volumes realized in the first quarter of the year when cold temperatures and frozen ground across the northern portion of our footprint can delay or prevent construction activity and consequently delay or prevent customer orders of PVC pipe.
SEASONALITY Demand for our PVC pipe products can be impacted by seasonal weather differences, with generally lower sales volumes realized in the first and fourth quarters of the year when cold temperatures and frozen ground across the northern portion of our footprint can delay or prevent construction activity and consequently delay or prevent customer orders of PVC pipe.
See below and Note 1 to our consolidated financial statements included in this report on Form 10-K for additional information. Coal is transported to Big Stone Plant by rail and is provided under a common carrier rate which includes a mileage-based fuel surcharge. We purchase natural gas for use at our combustion turbine facilities based on anticipated short-term resource needs.
Coal is transported to Big Stone Plant by rail and is provided under a common carrier rate which includes a mileage-based fuel surcharge. We purchase natural gas for use at our combustion turbine facilities based on anticipated short-term resource needs. We procure natural gas from multiple vendors at spot prices in a liquid market primarily under firm delivery contracts.
We anticipate we will incur costs related to coal ash removal and groundwater monitoring in the future as a result of the amended regulation; however, we continue to review and evaluate the overall impact this regulation may have on our business, including potential impacts to our operating results, financial condition and liquidity. Mercury and Air Toxics Standards.
We continue to review and evaluate the overall impact this regulation may have on our business, including potential impacts on our operating results, financial condition and liquidity. Mercury and Air Toxics Standards (MATS).
Department of Energy (DOE) approved a grant in an amount up to 25% of the total JTIQ project costs. OTP's capital investment in these projects, after the impact of the 25% DOE grant, is estimated to be $450 million. SEASONALITY Electricity demand is affected by seasonal weather differences, with peak demand occurring in the summer and winter months.
Department of Energy (DOE) has approved a grant to partially fund the construction of these projects in an amount up to 25% of the total JTIQ project costs. OTP's capital investment in these projects, after the impact of the 25% DOE grant, is currently estimated to be $450 to $500 million.
Our long-term focus remains on executing our strategy to grow our business and achieving operational, commercial and talent excellence to strengthen our position in the markets we serve.
Our strategy and risk profile are designed to provide a predictable earnings stream, investment grade credit ratings and continuous dividend payments to our shareholders. Our long-term focus remains on executing our strategy to grow our business and achieving operational, commercial and talent excellence to strengthen our position in the markets we serve.
As a result, our Electric segment operating results regularly fluctuate on a seasonal basis. In addition, fluctuations in electricity demand within the same season but between years can impact our operating results. We monitor the level of heating and cooling degree days in a period to assess the impact of weather-related effects on our operating results between periods.
We monitor the level of heating and cooling degree days in a period to assess the impact of weather-related effects on our operating results between periods.
Once these industry conditions have normalized, we expect to achieve our long-term financial objectives as outlined above. We will continue to review our business portfolio to identify additional opportunities to improve our risk profile, enhance our credit metrics and generate additional sources of cash to support the organic growth opportunities in our Electric, Manufacturing, and Plastics segments.
We regularly review our business portfolio to identify additional opportunities to improve our earnings and cash flow generation profile, reduce our risk profile, enhance our credit metrics and generate additional sources of cash to support the organic growth opportunities in our Electric, Manufacturing and Plastics segments.
No franchises are required to serve unincorporated communities in any of the three states OTP serves. GENERATION AND PURCHASED POWER OTP primarily relies on company-owned generation, supplemented by power purchase agreements, to supply the energy to meet our customer needs. Wholesale market purchases and sales of electricity are used as necessary to balance supply and demand.
No franchises are required to serve unincorporated communities in any of the three states OTP serves. GENERATION AND PURCHASED POWER OTP primarily uses its own generation facilities to supply energy to customers and supplements this with power purchase agreements. To balance supply and demand, OTP also buys and sells electricity on the wholesale market as needed.
We met the current renewable sources requirements with a combination of owned renewable generation and purchases from renewable generation sources. Minnesota law also requires 1.5% of total Minnesota retail electric sales by public utilities to be supplied by solar energy.
Minnesota law also requires 1.5% of total Minnesota retail electric sales by public utilities to be supplied by solar energy.
Declines in commodity prices for these scrap materials due to weakened demand or excess supply can negatively impact the profitability of our Manufacturing segment.
Additionally, a certain amount of residual material (scrap) is a by-product of the manufacturing and production processes. We are able to sell nearly all scrap material in the scrap market. Declines in commodity prices for these scrap materials due to weakened demand or excess supply can negatively impact the profitability of our Manufacturing segment.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn May 2024, the EPA finalized new regulations under Section 111 of the Clean Air Act to regulate GHG emissions from existing and new fossil fuel-based power plants. The new regulations require existing coal-fired power plants to achieve certain CO 2 emissions reduction levels, with the amount of reduction dependent upon the remaining operating life of the facility.
Biggest changeNew regulations recently finalized by the EPA require existing coal-fired power plants to achieve certain CO 2 emissions reduction levels, with the level of reduction dependent upon the remaining operating life of the facility. At this time, we cannot determine how this may impact our power plants and the potential impact on our operating results, financial condition and liquidity.
We are subject to physical and transition risks associated with climate change and extreme weather events. Longer term shifts in climate patterns may impact our customers' demand for electricity, interrupt our business operations and damage our facilities; reduce the availability of natural resources, such as water; and cause disruptions in our supply chains.
We are subject to physical risks and transition risks associated with climate change and extreme weather events. Longer-term shifts in climate patterns may impact our customers' demand for electricity; interrupt our business operations and damage our facilities; reduce the availability of natural resources, such as water; and cause disruptions in our supply chains.
Information systems, both ours and those of third parties, are vulnerable to security breaches by computer hackers and cyber terrorists, system failures, the negligent or intentional breach of established controls and procedures or mismanagement of confidential information by employees.
Information systems, both ours and those of third parties, are vulnerable to security breaches by computer hackers and cyber terrorists, system failures, the negligent or intentional breach of established controls and procedures or the mismanagement of confidential information by employees.
We may be unable to fully recover costs of our co-owned coal-fired generating facilities. Changes in regulatory, operational or economic factors could result in the early closure or sale of or withdrawal from our interest in a coal-fired generating facility.
We may be unable to fully recover costs of our co-owned coal-fired generating facilities. Changes in regulatory, operational or economic factors could result in the early closure, sale of, or withdrawal from our interest in a coal-fired generating facility.
Environmental regulation could require us to incur substantial capital expenditures, increased operating costs or make it no longer economically viable to operate some of our facilities. We are subject to federal, state and local environmental laws and regulations relating to air quality, water quality, waste management, natural resources and health safety.
Environmental regulation could require us to incur substantial capital expenditures or increased operating costs, or make it no longer economically viable to operate some of our facilities. We are subject to federal, state and local environmental laws and regulations relating to air quality, water quality, waste management, natural resources and health safety.
Changes in regulations or the imposition of additional regulations could have a material adverse impact on our financial condition, operating results and liquidity. Our generation, transmission and distribution facilities could be vulnerable to cyber and physical attack. OTP owns electric transmission, distribution and generation facilities subject to mandatory and enforceable standards advanced by the NERC.
Changes in regulations or the imposition of additional regulations could have a material adverse impact on our financial condition, operating results and liquidity. Our electric facilities could be vulnerable to cyber and physical attack. OTP owns electric transmission, distribution and generation facilities subject to mandatory and enforceable standards advanced by the NERC.
There can be no assurance that our state regulatory commissions will authorize recovery of rising costs. Regulatory commissions may also limit future capital investments, or the rate of return allowed on such investments in response to inflationary cost pressures and customer bill impacts. Such limitations could negatively impact our financial position, operating results and liquidity.
There can be no assurance that our state or federal regulatory commissions will authorize recovery of rising costs. Regulatory commissions may also limit future capital investments, or the rate of return allowed on such investments in response to inflationary cost pressures and customer bill impacts. Such limitations could negatively impact our financial position, operating results and liquidity.
Our IRP, approved in Minnesota by the MPUC in May 2024, directs OTP to commence activities to no longer serve Minnesota customers with capacity or energy from Coyote Station as early as 2029. The discontinuation of service to Minnesota customers from Coyote Station could result in stranded costs, which may significantly impact our operating results, financial condition and liquidity.
Our latest IRP, approved in Minnesota by the MPUC in May 2024, directs OTP to commence activities to no longer serve Minnesota customers with capacity or energy from Coyote Station as early as 2029. The discontinuation of service to Minnesota customers from Coyote Station could result in stranded costs, which may significantly impact our operating results, financial condition and liquidity.
Our electric business is subject to the risks associated with energy and capacity markets, including changes in market supply, energy and capacity prices. If we need to procure market energy and are faced with shortages in market supply, we may be unable to fulfill our contractual obligations to our retail, wholesale and other customers at previously anticipated costs.
Our electric business is subject to the risks associated with energy and capacity markets, including changes in market supply, and energy and capacity prices. If we need to procure market energy and are faced with shortages in market supply, we may be unable to fulfill our obligations to our retail, wholesale and other customers at previously anticipated costs.
We have incurred and expect to continue to incur capital expenditures and operating costs to comply with applicable current and future laws and regulations. Our businesses continue to be subject to additional and changing environmental, health and safety laws and regulations, and we could incur additional costs complying with requirements that are promulgated in the future.
We have incurred and expect to continue to incur capital expenditures and operating costs to comply with applicable current and future laws and regulations. As our businesses continue to be subject to additional and changing environmental, health and safety laws and regulations, we could incur additional costs complying with requirements that are promulgated in the future.
In addition, customer demand could be impacted by increased competition in our service territories or the loss of a service territory or franchise. Other risks include increased transmission or interconnection costs, generation curtailment and changes in the manner in which wholesale power is purchased and sold.
In addition, customer demand could be impacted by increased competition in our service territories or the loss of service territory or franchise. Other risks include increased transmission or interconnection costs, generation curtailment and changes in the manner in which wholesale power is purchased and sold.
Our ability to make determinations to best navigate changing environmental regulations and economic conditions may be impacted by our rights and obligations under the co-ownership and related agreements, and our ability to reconcile a divergence in the interests of OTP and the co-owners of these generation facilities.
Our ability to make determinations to best navigate changing environmental regulations and economic conditions may be impacted by our rights and obligations under the co-ownership and related agreements, and our ability to reconcile a divergence in the interests of OTP and the co-owners of these facilities.
These bulk electric system facilities provide the framework for the electrical infrastructure of OTP’s service territory and interconnected systems, the operation of which is dependent on information technology systems. Further, the information systems that operate OTP’s electric system are interconnected to external networks.
These bulk electric system facilities provide the framework for the electrical infrastructure of OTP’s service territory and interconnected systems, the operation of which is dependent on information technology (IT) systems. Further, the information systems that operate OTP’s electric system are interconnected to external networks.
These factors include: • our customers’ failure to successfully market their products, gain or retain widespread commercial acceptance of their products or compete effectively in their industries; • loss of market share for our customers’ products, which may lead our customers to reduce or discontinue purchasing our products and components and to reduce prices, thereby exerting pricing pressure on us; • economic conditions in the markets in which our customers operate, the United States in particular, including recessionary periods such as a global economic downturn; • our customers’ decisions to bring the production of components in-house that have traditionally been outsourced to us; and • seasonality of demand for our customers’ products, which may cause our manufacturing capacity to be underutilized for periods of time; • product design changes or manufacturing process changes that may reduce or eliminate demand for the components we supply.
These factors include: • our customers’ failure to successfully market their products, gain or retain widespread commercial acceptance of their products or compete effectively in their industries; • loss of market share for our customers’ products, which may lead our customers to reduce or discontinue purchasing our products and components and to reduce prices, thereby exerting pricing pressure on us; 25 Table of Contents • economic conditions in the markets in which our customers operate, the United States in particular, including recessionary periods such as a global economic downturn; • our customers’ decisions to bring the production of components in-house that have traditionally been outsourced to us; • seasonality of demand for our customers’ products, which may cause our manufacturing capacity to be underutilized for periods of time; and • product design changes or manufacturing process changes that may reduce or eliminate demand for the components we supply.
Revised 22 Table of Contents or additional regulations which result in increased compliance costs or additional operating restrictions, particularly if those costs are not fully recoverable from customers, could have a material effect on our financial condition, operating results and liquidity, making the operation of some of our facilities no longer economically viable.
Revised 23 Table of Contents or additional regulations which result in increased compliance costs or additional operating restrictions, particularly if those costs are not fully recoverable from customers, could have a material effect on our financial condition, operating results and liquidity, making the operation of some of our facilities no longer economically viable.
We expect sales prices for PVC pipe to continue to decline, which will cause a decline in operating margins and cash generation prospectively. The pace and magnitude of the decline in product pricing could materially impact our operating results and liquidity. Changes in PVC resin prices could negatively affect our plastics business.
We expect sales prices for PVC pipe to continue to decline, which will cause a decline in operating margins and cash generation prospectively. The pace and magnitude of the decline in product pricing could materially impact our operating results and liquidity. Changes in PVC resin prices could negatively affect our plastics business. PVC resin is a commodity product.
The loss of a key vendor or any interruption or delay in the availability or supply of PVC resin could disrupt our ability to deliver our plastic products, cause customers to cancel orders or require us to incur additional expenses to obtain PVC resin from alternative sources, if such sources were available.
The loss of a key vendor or any interruption or delay in the availability or supply of PVC resin could disrupt our ability to deliver our plastic products, cause customers to cancel orders or require us to incur additional expenses to obtain PVC resin from alternative sources, if such sources are available.
Sales prices for PVC pipe began to significantly increase in 2021, reaching a peak level in mid-2022. Pipe prices have since retreated from the high point but remain elevated compared to historic levels. Elevated pipe prices led to a significant expansion in our operating margins and cash generation.
Sales prices for PVC pipe began to significantly increase in 2021, reaching a peak level in mid-2022. Pipe prices have since retreated from the peak but remain elevated compared to historic levels. Elevated pipe prices led to a significant expansion in our operating margins and cash generation.
Changes in tax laws, regulations and interpretations could have an adverse effect on our financial condition and operating results.
Changes in tax laws, regulations and interpretations could have an adverse effect on our financial condition, operating results and liquidity.
The continued success of our businesses will depend on our ability to: • maintain technological leadership in our industry; • implement new and expand on current robotics, automation and tooling technologies; and • anticipate or respond to changes in manufacturing processes in a cost-effective and timely manner.
The continued success of our business will depend on our ability to: • maintain technological leadership in our industry; • implement new and expand on current robotics, automation and tooling technologies; and • anticipate or respond to changes in manufacturing processes in a cost-effective and timely manner.
This could force us to obtain alternative energy or fuel supplies at higher costs or suffer increased liabilities for unfulfilled contractual obligations. Changes in our own generation capacity or market capacity, including from changes in capacity accreditation, could lead to increased capacity prices.
This could force us to obtain alternative energy or fuel supplies at higher costs or suffer increased liabilities for unfulfilled contractual obligations. Changes in our own generation capacity or market capacity, including from changes in capacity accreditation or other factors, could lead to increased capacity prices.
For example, we may face challenges with the adoption of new technologies, meeting changing customer expectations, ensuring reliability of electric service, and committing to voluntary GHG emissions reduction goals, as well as complying with evolving local, state or federal regulatory requirements intended to reduce GHG emissions. 19 Table of Contents Our operations are subject to environmental, health and safety laws and regulations.
For example, we may face challenges with the adoption of new technologies, meeting changing customer expectations, ensuring reliability of electric service, and committing to voluntary GHG emissions reduction goals, as well as complying with evolving local, state or federal regulatory requirements intended to reduce GHG emissions. Our operations are subject to environmental, health and safety laws and regulations.
Failure to comply with environmental laws and regulations, even if caused by factors beyond our control, may result in civil or criminal liabilities, penalties and fines. Coyote Station, one of OTP's jointly owned coal-fired power plants, is subject to assessment under the second planning period of the RHR as part of the state of North Dakota's RHR SIP.
Failure to comply with environmental laws and regulations, even if caused by factors beyond our control, may result in civil or criminal liabilities, penalties and fines. Coyote Station, one of OTP's jointly owned coal-fired power plants, is subject to assessment under the RHR as part of the state of North Dakota's RHR SIP.
While we carry liability insurance, given an extreme event, if we were found to be liable for damages, amounts that exceed our coverage limit could negatively impact our financial condition, operating results and liquidity. These risks may also negatively impact our credit ratings, which may limit our access to capital markets and increase our borrowing costs.
While we carry liability insurance, given an extreme event, if we were found to be liable for damages caused by the event, amounts that exceed our coverage limit could negatively impact our financial condition, operating results and liquidity. These risks may also negatively impact our credit ratings, which may limit our access to capital markets and increase our borrowing costs.
Failure to anticipate and adapt to customers’ changing technological needs and requirements and to 25 Table of Contents maintain manufacturing, engineering and technological expertise may have material adverse effects on our financial condition, operating results and liquidity. PLASTICS SEGMENT RISKS External factors beyond our control could cause fluctuations in demand for and pricing of our PVC pipe products.
Failure to anticipate and adapt to customers’ changing technological needs and requirements and to maintain manufacturing, engineering and technological expertise may have material adverse effects on our financial condition, operating results and liquidity. PLASTICS SEGMENT RISKS External factors beyond our control could cause fluctuations in demand for and pricing of our PVC pipe products.
Our financial condition, operating results and liquidity are significantly impacted by and dependent upon our ability to recover the costs associated with providing utility service and earn a return on our utility capital investments.
Our financial condition, operating results and liquidity are significantly impacted by, and dependent upon, our ability to recover the costs associated with providing utility service and earning a return on our utility capital investments.
The primary source of funds for payment of our financial obligations and dividends to our shareholders is from cash provided by our subsidiary companies. Our ability to meet our financial obligations and pay dividends on our common stock principally depends on the earnings, cash flows, capital requirements and general financial positions of our subsidiary companies.
The primary source of funds for payment of our financial obligations and dividends to our shareholders is cash provided by our subsidiary companies. Our ability to meet our financial obligations and pay dividends on our common stock principally depends on the earnings, cash flows, capital requirements and general financial position of our subsidiary companies.
New laws or regulations or changes to existing laws and regulations in the future may result in disruptions to our business, changes in customer preferences or changes in customer demand, which could adversely impact our financial condition, operating results and liquidity.
New laws or regulations, or changes to 20 Table of Contents existing laws and regulations in the future, may result in disruptions to our business, changes in customer preferences or changes in customer demand, which could adversely impact our financial condition, operating results and liquidity.
In addition to competing with other plastic pipe manufacturers, our products also complete against similar products serving the same end markets, including ductile iron, HDPE, steel and concrete pipe. Our inability to compete effectively on product price, customer service and product performance may adversely affect the financial performance of our plastics businesses.
In addition to competing with other plastic pipe manufacturers, our products also compete against similar products serving the same end markets, including ductile iron, HDPE, steel and concrete pipe. Our inability to compete effectively on product price, customer service and product performance may adversely affect the financial performance of our plastics businesses. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Examples of external factors include: • general economic conditions including housing and construction markets which can be cyclical; • increases in interest rates; • severe weather and natural disasters; • governmental regulation in the United States; and • funding shortages for municipal water and wastewater projects.
Examples of external factors include: • general economic conditions including housing and construction markets which can be cyclical; • increases in interest rates; • severe weather and natural disasters; • governmental regulation; and 26 Table of Contents • funding shortages for municipal water and wastewater projects.
Our Electric segment business is seasonal, and weather patterns have had an impact on our financial performance in the past and may again in the future. Demand for electricity is normally greater in the winter and summer months. Unusually mild summers and winters could have an adverse effect on our financial condition and results of operations.
Our Electric segment business is seasonal, and weather patterns have had an impact on our financial performance in the past and may again in the future. Demand for electricity is normally greater in the winter and summer months. Unusually mild temperatures negatively impact demand for electricity which can have an adverse effect on our financial condition and results of operations.
Competition in the plastic pipe industry arises from other PVC pipe manufacturers and the fungible nature of the product. Certain of the companies we compete with have a broader geographical reach, integration with PVC resin producers, greater manufacturing capacity and national relationships with key distribution partners.
We face intense competition in the plastic pipe industry from other PVC pipe manufacturers. Certain companies we compete with have a broader geographical reach, integration with PVC resin producers, greater manufacturing capacity and national relationships with key distribution partners.
Any of these proceedings, including the currently ongoing proceedings related to our Plastics segment businesses, could have an adverse effect on our financial condition, operating results and liquidity.
Any of these threatened or actual claims, proceedings, or investigations, including the currently ongoing proceedings and investigations related to our Plastics segment businesses and OTC, could have an adverse effect on our financial condition, operating results and liquidity.
An extreme weather event within our utility service area could directly affect our capital assets, causing disruption in service to customers, and result in reduced operating revenues and additional repair or replacement costs, due to downed wires and poles or damage to other operating equipment.
An extreme weather event within our utility service area could directly affect our capital assets, causing disruption in service to customers, and result in reduced operating revenues and additional repair or replacement costs.
Additionally, a certain amount of residual material (scrap) is a by-product of the manufacturing and production processes used by our manufacturing companies. Declines in commodity prices for these scrap materials due to weakened demand or excess supply can negatively impact the profitability of our manufacturing companies as it reduces their ability to mitigate the cost associated with excess material.
Additionally, a certain amount of residual material (scrap) is a by-product of the manufacturing and production processes used by our manufacturing companies. Declines in commodity prices for these scrap materials due to weakened demand or excess supply can negatively impact the profitability of our manufacturing companies.
It is possible that a resolution of one or more proceedings, including as a result of a settlement, could involve damages, sanctions, consent decrees or orders requiring us to make substantial future payments, prevent us from offering certain products or services, require us to change our business practices in a manner materially adverse to our business, otherwise disrupt our business, divert management resources, damage our reputation or otherwise have a material effect on our operations.
It is possible that a resolution of one or more proceedings, including a resulting settlement, could involve damages, sanctions, consent decrees or orders requiring us to make substantial future payments, preventing us from offering certain products or services, requiring us to change our business practices in a manner materially adverse to our business, otherwise disrupting our business, diverting management resources, damaging our reputation or otherwise having a material effect on our operations.
General economic and industry conditions impact our business. Several factors, many of which are beyond our control, may contribute to reduced demand for energy from our customers or increase the cost of providing energy to our customers.
Several factors, many of which are beyond our control, may contribute to reduced demand for energy from our customers or increase the cost of providing energy to our customers.
We are periodically subject to actual and threatened claims, litigation, investigations and other proceedings, including proceedings by governments and regulatory authorities, involving utilities regulation, competition and antitrust, product quality matters, and liability claims.
Claims, litigation, government investigations and other proceedings may adversely affect our business, operating results and liquidity. We are periodically subject to actual and threatened claims, litigation, investigations and other proceedings, including proceedings by governments and regulatory authorities, involving utilities regulation, competition and antitrust, product quality matters and liability claims.
A downgrade of our credit ratings could result in higher borrowing costs thereby negatively impacting our operating results and limiting our ability to access capital markets, which may negatively impact our ability to implement our business plans.
We rely on our investment grade credit ratings to provide acceptable costs for accessing the capital markets. A downgrade of our credit ratings could result in higher borrowing costs thereby negatively impacting our operating results and limiting our ability to access capital markets, which may negatively impact our ability to implement our business plans.
Our PVC pipe products, sold through distributors and wholesalers, are primarily used in municipal and rural water projects, wastewater projects, storm drainage systems and reclamation systems. External factors beyond our control can cause volatility in demand for our products and sales prices impacting our operating margins.
Our PVC pipe products, sold through distributors, are primarily used in municipal and rural water projects, wastewater projects, storm drainage systems and reclamation systems. External factors beyond our control can cause volatility in demand for our products and sales prices impacting our operating margins. These factors can magnify the impact of economic cycles on our business and results of operations.
Additional risks and uncertainties we are not presently aware of or that we currently consider immaterial may also affect our business, operating results, financial condition and liquidity. OPERATIONAL RISKS Our strategy includes large capital investments, which are subject to risks. Our business strategy includes major capital investments at our operating companies.
Unforeseen risks and uncertainties, or those that we currently consider immaterial, could also affect our business, operating results, financial condition and liquidity. 19 Table of Contents OPERATIONAL RISKS Our strategy includes large capital investments, which are subject to risks. Our business strategy includes major capital investments at our operating companies.
Changes in tax laws could materially affect our financial condition and operating results. Our provision for income taxes and tax obligations are impacted by various tax laws and regulations, including the availability of various tax credits, IRS tax policies such as tax normalization and, at times, the ability to carryforward net operating losses and tax credits.
Our provision for income taxes and tax obligations are impacted by various tax laws and regulations, including the availability of various tax credits, IRS tax policies such as tax normalization and, at times, the ability to carry forward net operating losses and tax credits.
Competition from domestic and foreign manufacturers could affect the revenues and earnings of our manufacturing businesses. Our manufacturing businesses are subject to intense competition from domestic and foreign manufacturers, many of whom have broader product lines, greater distribution capabilities, greater capital resources, larger marketing, research and development personnel and facilities, and other capabilities.
Competition from domestic and foreign manufacturers could affect the revenues and earnings of our manufacturing businesses. Our manufacturing businesses are subject to intense competition from domestic and foreign manufacturers, some of which have broader product lines, greater distribution capabilities, greater capital resources, greater marketing and research and development capabilities, or lower cost structures.
We rely on our subsidiaries to provide sufficient earnings and cash flows to allow us to meet our financial obligations and pay dividends to our shareholders. OTC is a holding company with no significant operations of its own.
In addition, our funding requirements could be impacted by changes to the Pension Protection Act. We rely on our subsidiaries to provide sufficient earnings and cash flows to allow us to meet our financial obligations and pay dividends to our shareholders. OTC is a holding company with no significant operations of its own.
Increased risk of natural disasters, such as wildfires, could have financial consequences, including limiting our ability to secure sufficient insurance coverage, or lead to increased insurance cost.
Increased risk of natural disasters, such as wildfires and severe convective storms, could have negative financial consequences, including limiting our ability to secure sufficient insurance coverage, or leading to increased insurance costs.
Any significant interruption or failure of our information systems or any significant breach of security due to cyber-attacks, hacking or internal security breaches or physical attack of our generation or transmission facilities could adversely affect our business and our financial condition, operating results and liquidity.
Any significant interruption or failure of our information systems or any significant breach of security due to cyber attacks, hacking or internal security breaches or physical attacks on our generation or transmission facilities could adversely affect our business and our financial condition, operating results and liquidity. 24 Table of Contents We are subject to risks associated with energy and capacity markets.
Most U.S. resin production plants are located in the Gulf Coast region. This could increase the risk of a shortage of resin in the event of a hurricane, other extreme weather events and other natural disasters in that region.
This could increase the risk of a shortage of resin in the event of a hurricane or other extreme weather events and other natural disasters in that region.
Diverging public policy priorities across the jurisdictions we serve and a lack of inter-jurisdictional consensus may impact our ability to recover the cost of and return on our capital investments and our operating costs; it may impact our future capital investment opportunities; and may result in inefficiencies which could negatively impact our financial position, operating results and liquidity.
Diverging public policy priorities across the jurisdictions we serve, and a lack of inter-jurisdictional consensus may impact our ability to recover the cost of and return on our capital investments and our operating costs.
In addition to property and casualty insurance, which may cover restoration of data, certain physical damage or third-party injuries, we have cybersecurity insurance related to a breach event.
In addition to property and casualty insurance, which may cover restoration of data and certain physical damage or third-party injuries, we have cybersecurity insurance related to a breach event. However, damage and claims arising from such incidents may not be covered or may exceed the amount of any available insurance.
Tax law changes that reduce or eliminate production or investment tax credits (ITCs), or the ability to transfer or sell these credits, or a failure to meet the compliance requirements to receive these credits, may impact the economics of constructing certain electric generation resources, which may impact our planned investments, and could adversely affect our financial condition and operating results. 21 Table of Contents ELECTRIC SEGMENT RISKS Our utility business is significantly impacted by government legislation and regulation.
Tax law changes that reduce or eliminate production or investment tax credits (ITCs), or the ability to transfer or sell these credits, may impact the economics of constructing certain electric generation resources, which may impact our planned investments, and could adversely affect our financial condition and operating results.
Such a divergence could impair our ability to effectively manage these changing conditions to meet our strategic objectives, and could adversely impact our financial condition, operating results and liquidity. We are subject to risks associated with energy and capacity markets.
Such a divergence could impair our ability to effectively manage these changing conditions to meet our strategic objectives, and could adversely impact our financial condition, operating results and liquidity. General economic and industry conditions impact our business.
A major cyber incident could result in significant expenses to investigate and repair security breaches or system damage, and could lead to litigation, fines, other remedial action, heightened regulatory scrutiny and damage to our reputation. For example, we may be subject to liability under various federal, state and international disclosure laws and data protection laws.
A major cyber incident could result in significant expenses to investigate and repair security breaches or system damage, and could lead to litigation, fines, other remedial action, heightened regulatory scrutiny and damage to our reputation.
We also take prudent and reasonable steps to protect the physical security of our transmission, distribution and generation facilities. However, all these measures and technology may not adequately prevent security breaches, ransomware attacks or other cyber-attacks, or enable us to recover effectively from such a breach or attack.
However, all these measures and technology may not adequately prevent security breaches, ransomware attacks or other cyber attacks, or enable us to recover effectively from such a breach or attack.
The financial obligations and related costs of our pension and other postretirement benefit plans are affected by numerous factors. Assumptions related to future costs, investment returns, actuarial estimates and interest rates have a significant effect on our funding obligations and the cost recognized related to these plans.
The financial obligations and related costs of our pension and other postretirement benefit plans are affected by numerous factors, including interest rates, investment returns, future employee compensation levels, healthcare cost trends and mortality rates. Changes in any, or a combination, of these factors could have a significant effect on our funding obligations and the costs recognized for these plans.
OTP implements the NERC standards for operating its transmission and generation assets and remains abreast of best practices within the business and the utility industry to 23 Table of Contents protect its computers and computer-controlled systems from outside attack.
OTP implements the NERC standards for operating its transmission and generation assets and remains abreast of best practices within the business and the utility industry to protect its computers and computer-controlled systems from outside attack. We rely on industry-accepted security measures and technology to securely maintain confidential and proprietary information necessary for the operation of our systems.
The operation of our generation, transmission and distribution facilities involves many risks including equipment failures, accidents and workforce safety matters, environmental damage, property damage, operator error and the occurrence of catastrophic events such as fires, explosions and floods. Diminished availability or performance of those facilities could result in facility shutdowns, reduced customer satisfaction, reputational harm and regulatory inquiries and fines.
The operation of our generation, transmission and distribution facilities involves many risks including the potential for equipment failures, accidents and workforce safety matters, environmental damage, property damage, operator error and the occurrence of catastrophic events such as fires, explosions and floods.
Capital markets are impacted by global and domestic economic conditions, monetary policy, commodity prices, geopolitical events and other factors. If we are unable to access capital on acceptable terms and at reasonable costs, our ability to implement our business plans may be adversely affected. In addition, higher market interest rates on outstanding variable-rate indebtedness could also impact our operating results.
If we are unable to access capital on acceptable terms and at reasonable costs, our ability to implement our business plans may be adversely affected. In addition, higher market interest rates on outstanding variable-rate indebtedness could also impact our operating results. A decrease in our credit ratings could increase our borrowing costs and result in additional contractual costs.
Capital investments in our Electric segment require regulatory approval and are subject to the risks of not being granted timely approval or allowed to be fully recovered. In addition, our ability to construct and own utility assets may be impacted by regulatory requirements to competitively bid such investments, which could impact the amount and timing of our capital investments.
Capital investments in our Electric segment require regulatory approval and are subject to the risks of not being granted timely approval or allowed to be fully recovered.
We are subject to an extensive legal and regulatory framework imposed under federal and state laws and regulatory agencies, including the FERC and the North American Electric Reliability Corporation (NERC). We could be subject to potential financial penalties for compliance violations. Our transmission systems and electric generation facilities are subject to the NERC mandatory reliability standards, including cybersecurity standards.
Violations of extensive legal and regulatory compliance requirements could have a negative impact on our business and results of operations. We are subject to an extensive legal and regulatory framework imposed under federal and state laws and regulatory agencies, including the FERC and the North American Electric Reliability Corporation (NERC).
An adverse decision by one or more regulatory authorities or any prolonged delay in rendering a decision in a rate or other proceeding could adversely impact our financial condition, operating results and liquidity. Inflationary cost pressures have increased the cost of constructing our utility assets and operating our utility business.
An adverse decision by one or more regulatory authorities or any prolonged delay in rendering a decision in a rate case or other proceeding could adversely impact our financial condition, operating results and liquidity. Changes in the federal or state regulatory framework could impair our ability to recover utility costs historically collected from our customers.
We rely on a limited number of vendors to supply the PVC resin used in our plastics businesses. In 2024, we sourced all of our PVC resin needs from four vendors. In addition, the supply of PVC resin may be limited primarily due to manufacturing capacity and the limited availability of raw material components.
Our plastics operations are highly dependent on a limited number of vendors and a limited supply of PVC resin and other materials. We rely on a limited number of vendors to supply the PVC resin used in our plastics businesses. In 2025, we sourced all of our PVC resin needs from four vendors.
In addition to the recovery of our utility costs, our profitability is impacted by our authorized ROE, which can be impacted by macroeconomic factors such as interest rates. There can be no assurance that each state utility commission or the FERC will authorize a rate of return which allows us to achieve our financial goals.
There is no assurance that each state utility commission will judge our utility costs to have been prudently incurred or that rates will produce full recovery of such costs. In addition, there is no assurance that we will be authorized to recover a rate of return on our investments that allows us to achieve our financial goals.
We rely on industry-accepted security measures and technology to securely maintain confidential and proprietary information necessary for the operation of our systems. In an effort to reduce the likelihood and severity of cyber intrusions, we have cybersecurity processes and controls, and disaster recovery plans designed to protect and preserve the confidentiality, integrity and availability of data and systems.
In an effort to reduce the likelihood and severity of cyber intrusions, we have cybersecurity processes and controls, and disaster recovery plans designed to protect and preserve the confidentiality, integrity and availability of data and systems. We also take prudent and reasonable steps to protect the physical security of our transmission, distribution and generation facilities.
However, there is no guarantee our compliance program will be sufficient to ensure against violations. These laws and regulations significantly influence our operations and may affect our ability to recover costs from our customers. We are required to have numerous permits, licenses, approvals and certificates from the agencies and other organizations that regulate our business.
We attempt to mitigate the risk of regulatory penalties through our compliance program. However, there is no guarantee our program will be sufficient to prevent compliance violations. These laws and regulations significantly influence our operations and may affect our ability to recover costs from our customers.
A prolonged failure to perform by one or more of our current suppliers or service providers could lead to increased costs or other consequences, which could negatively impact our financial condition, operating results and liquidity. 24 Table of Contents MANUFACTURING SEGMENT RISKS We are impacted by our customers' strategies, operational decisions and conditions in the end markets they serve .
A decrease in revenues or an increase in expenses related to our electric operations could negatively impact our financial condition, operating results and liquidity. MANUFACTURING SEGMENT RISKS We are impacted by our customers' strategies, operational decisions and conditions in the end markets they serve .
A lack of direct ownership, or the inability to complete capital projects on budget and in a timely manner could impact our ability to achieve our strategic financial goals and could adversely impact our operating results and financial condition. Weather impacts, including seasonal fluctuations, could adversely affect our operating results.
If we are unable to manage these risks and complete our capital investment projects on budget and in a timely manner, it could have negative impact on our financial condition, operating results and liquidity. Weather impacts, including seasonal fluctuations, could adversely affect our operating results.
In 2024, a single customer provided more than 10% of our consolidated operating revenues, and each of our segments have customers which accounted for over 10% of the segment’s operating revenues.
The loss of, or significant reduction in revenue from, any of our key customers could have an adverse effect on our operating results. In 2025, no single customer provided more than 10% of our consolidated operating revenues, however, each of our segments had customers which accounted for over 10% of the segment’s operating revenues.
The operation of our business is dependent on the secure functioning of our computer hardware and software systems, as well as that of third-party service providers and vendors.
The outcomes of these matters are inherently unpredictable and subject to significant uncertainties. A cyber incident, security breach or system failure could adversely affect our business and operating results. The operation of our business is dependent on the secure functioning of our computer hardware and software systems, as well as that of third-party service providers and vendors.
Significantly higher than expected energy or capacity costs could negatively affect our financial condition, operating results and liquidity. We are subject to risks associated with the procurement and transportation of fuel to our coal and natural gas-powered generation facilities.
Significantly higher than expected energy or capacity costs could negatively affect our financial condition, operating results and liquidity. Our electric facilities are subject to operational risks, which could result in injuries, loss of life, property damage and liability claims.
FINANCIAL RISKS We are subject to capital market and interest rate risks. We rely on access to debt and equity capital markets as a source of liquidity to fund our investment initiatives, including rate base growth investments in our Electric segment and opportunities for investment, including acquisitions, in our Manufacturing and Plastics segments.
FINANCIAL RISKS We are subject to capital market and interest rate risks. We rely on access to debt and equity capital markets as a source of liquidity to fund our strategic investment initiatives. Capital markets are impacted by global and domestic economic conditions, monetary policy, commodity prices, geopolitical events and other factors.
In 2024, two customers combined to account for 19% of Electric segment revenues, two customers combined to account for 36% of Manufacturing segment operating revenues and two customers combined to account for 52% of Plastics segment operating revenues, with one of those customers providing more than 10% of our consolidated operating revenues.
In 2025, two customers combined to account for 16% of Electric segment revenues, three customers combined to account for 44% of Manufacturing segment operating revenues and two customers combined to account for 47% of Plastics segment operating revenues.
If a serious reliability incident were to occur, it could have a material effect on our operations or financial results. Some states have the authority to impose substantial penalties in the event of non-compliance. We attempt to mitigate the risk of regulatory penalties through formal training.
We could be subject to potential financial penalties for compliance violations. Our transmission systems and electric generation facilities are subject to the NERC mandatory reliability standards, including cybersecurity standards. If a serious reliability incident were to occur, it could have a material effect on our operations or financial results.
The new regulation has the potential to materially impact the operations of our coal-fired power plants, which could have a material impact on our operating results, financial condition and liquidity. In addition to complying with legislation and regulation, we could be subject to litigation related to climate change.
In addition to complying with legislation and regulation, we could be subject to litigation related to climate change.
The cost of PVC resin is based on global supply and demand conditions, which can create volatile pricing. Changes in PVC resin cost prices can negatively affect PVC pipe prices and profit margins on PVC pipe sales. Our plastics operations are highly dependent on a limited number of vendors and a limited supply of PVC resin and other materials.
Its market price is impacted by global supply and demand conditions along with feedstock component pricing. Both of these factors can create volatile pricing for PVC resin, the primary material input used in manufacturing our PVC pipe products. Changes in the cost of PVC resin directly impact our profit margins.
Removed
Recently, various federal and state agencies have heightened their scrutiny of per- and polyfluoroalkyl substances (PFAS), which are manufactured chemicals used in a variety of consumer and industrial products.
Added
We are subject to risks associated with our supply chain and trade regulations and tariffs. Our operations depend on the timely and cost-effective procurement and transportation of raw materials, including coal, natural gas, steel and aluminum, PVC resin and other materials.
Removed
Regulators have recently proposed additional chemicals be designated as hazardous substances, including a proposal to designate perfluorooctanesulfonic acid and perfluorooctanoic acid, two of the most common PFAS chemicals, as hazardous substances, which could have wide-ranging impacts on companies across various industries, including ours.
Added
Global and domestic supply chain disruptions, which may be caused by numerous factors outside of our control, may affect the availability and pricing of critical materials and equipment. 21 Table of Contents Changes in trade policies, including tariffs and anti-dumping and countervailing duties, could increase the cost of certain materials used in constructing and maintaining our utility assets and impact the cost of raw materials used in our manufacturing processes.
Removed
At this time, we cannot predict the outcome or the severity of the impact, if any, of future laws or regulations enacted to address PFAS. Claims, litigation, government investigations and other proceedings may adversely affect our business, operating results and liquidity.
Added
Specifically, tariffs arising from recent or ongoing anti-dumping and countervailing duty investigations could impact the cost of components necessary in constructing certain renewable generation assets. The imposition of such tariffs could increase the cost of our capital investments for which we are not guaranteed recovery.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe ICSP group consists of Information Technology (IT) managers, IT security subject matter experts, and internal audit personnel and is led by our Vice President of IT who has more than 25 years of experience in IT, enterprise security and cyber risk management, a Bachelor's degree of Science, CIS, Information Technology and Master's of Business, Information Systems, and holds Certified Information Systems Security Professional, Certified Information Security Manager and Certified Data Privacy Solution Engineer designations.
Biggest changeThe ICSP group consists of IT managers, IT security subject matter experts, and internal audit personnel and is led by our Vice President of Information Security and Technology who has more than 20 years of experience in IT, enterprise security and cyber risk management, and holds a Certified Information Systems Security Professional designation.
The plans outline the processes related to detecting, assessing, investigating, mitigating and remediating cyber incidents, as well the communication and reporting plan and the required personnel to be included in the process and communications. Our cybersecurity risk management is integrated into our overall risk management system through our internal business risk management process.
The plans outline the processes related to detecting, assessing, investigating, mitigating and remediating cyber incidents, as well as the communication and reporting plan and the required personnel to be included in the process and communications. Our cybersecurity risk management is integrated into our overall risk management system through our internal business risk management process.
ITEM 1C. CYBERSECURITY CYBERSECURITY RISK The operation of our businesses is dependent on the secure functioning of our computer infrastructure and digital information systems. Furthermore, all our businesses require us to collect and maintain sensitive customer data, as well as confidential employee and shareholder information, which is subject to electronic theft or loss.
ITEM 1C. CYBERSECURITY CYBERSECURITY RISK The operation of our businesses is dependent on the secure functioning of our computer infrastructure and digital information systems. Furthermore, all our businesses require us to collect and maintain sensitive customer and vendor data, as well as confidential employee and shareholder information, which is subject to electronic theft or loss.
Our business risk management group works closely with our ICSP group to regularly assess and identify possible material risks from cybersecurity threats, including but not limited to, financial, operations, reputational and regulatory impact to the Company, as well as impacts on our employees and customers. Their risk assessment results are reported to our Executive Risk Committee on a quarterly basis.
Our business risk management group works closely with our ICSP group to regularly assess and identify possible material risks from cybersecurity threats, including but not limited to financial, operational, reputational and regulatory impact to the Company, as well as impacts on our employees and customers. Their risk assessment results are reported to our Executive Risk Committee on a quarterly basis.
The CIS Critical Security Controls are a set of 18 cybersecurity-related controls which aid companies in designing an effective control environment and are viewed as best practices by organizations worldwide. A significant number of our cybersecurity policies and practices associated with our electric utility operations are also subject to regulation by multiple governmental and other agencies.
The CIS Critical Security Controls are a set of 18 cybersecurity-related controls which aid companies in designing an effective control environment and are viewed as best practices by organizations worldwide. A significant number of our cybersecurity policies and practices associated with our electric utility operations are also subject to regulation by multiple government and other agencies.
We perform a corporate risk assessment annually, which includes specific consideration and assessment of cybersecurity risk. As part of our risk assessment process, we incorporate results from procedures performed by third-party consultants. We utilize third-party consultants to perform penetration and vulnerability testing and monitoring, as well as overall cybersecurity control testing.
We perform a corporate risk assessment at least annually, which includes specific consideration and assessment of cybersecurity risk. As part of our risk assessment process, we incorporate results from procedures performed by third-party consultants. We utilize third-party consultants to perform penetration and vulnerability testing and monitoring, as well as overall cybersecurity control testing.
Our strategy includes employee training and awareness on cybersecurity risks and related best practices, required 27 Table of Contents password complexity, the use of multi-factor authentication, information security protocols, anti-virus and anti-ransomware software, a patch management program, the execution of tabletop exercises on a periodic basis, established policies and protocols for cyber incident response planning and reporting, and ongoing internal cybersecurity testing.
Our strategy includes employee training and awareness on cybersecurity risks and related best practices, required password complexity, the use of multi-factor authentication, information security protocols, anti-virus and anti-ransomware software, a patch management program, the execution of tabletop exercises on a periodic basis, established policies and protocols for cyber incident response planning and reporting, and ongoing internal cybersecurity testing.
We may also be impacted by attacks and data security breaches of financial institutions, merchants or other business partners. As part of our utility operations, we own electric generation, transmission and distribution facilities that are part of an interconnected regional grid, the operation of which is dependent on information technology systems.
We may also be impacted by attacks and data security breaches of financial institutions, merchants or other business partners. As part of our utility operations, we own electric generation, transmission and distribution facilities that are part of an interconnected regional grid, the operation of which is dependent on IT systems.
Although we have not historically experienced material cyber incidents, we and other utilities are subject to cyber-attacks of increasing frequency and sophistication, and any significant interruption or failure of our information systems or any significant breach of security due to cyber-attacks, hacking or internal security breaches, could adversely affect our business and our financial condition, operating results and liquidity.
Although we have not historically experienced material cyber incidents, we and other utilities are subject to cyber attacks of increasing frequency and sophistication, and any significant interruption or failure of our information systems or any significant 27 Table of Contents breach of security due to cyber attacks, hacking or internal security breaches, could adversely affect our business and our financial condition, operating results and liquidity.
At least annually, our Vice President of IT provides an overview of our cybersecurity program to the Board of Directors, including a review of key strategies, emerging risks and a summary of key performance indicators. In addition, annually the Board of Directors reviews the results of our penetration and vulnerability testing. 28 Table of Contents
At least annually, our Vice President of Information Security and Technology provides an overview of our cybersecurity program to the Board of Directors, including a review of key strategies, emerging risks and a summary of key performance indicators. In addition, the Board of Directors reviews the results of our penetration and vulnerability testing annually. 28 Table of Contents
The Executive Risk Committee, which is comprised of our executive officers, meets quarterly to identify and assess short-, medium- and long-term risks, and to ensure adequate mitigation strategies are implemented. During these meetings, the Executive Risk Committee reviews significant and emerging risks, including cybersecurity risks, and assesses the Company’s plans to mitigate or otherwise manage and monitor those risks.
The Executive Risk Committee, which is comprised of our executive officers, meets quarterly to identify and assess short-, medium- and long-term risks, and to review our mitigation strategies. During these meetings, the Executive Risk Committee reviews significant and emerging risks, including cybersecurity risks, and assesses the Company’s plans to mitigate or otherwise manage and monitor those risks.

Item 2. Properties

Properties — owned and leased real estate

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Biggest change(2) As of December 31, 2024, OTP held a 14.8% ownership interest of 70 miles of the 230 kV transmission lines, with the remaining miles being wholly owned. 29 Table of Contents MANUFACTURING AND PLASTICS SEGMENTS The following reflects the properties of our Manufacturing and Plastic segments as of December 31, 2024 which are significant to our operations: Segment/Location Owned/Leased Facility Type/Use Approximate Square Feet Manufacturing Segment Otsego, MN Leased Manufacturing/Warehouse 86,000 Clearwater, MN Owned Office/Manufacturing/Warehouse 204,000 Washington, IL Leased Office/Manufacturing/Warehouse 218,000 Sauk Rapids, MN Leased Warehouse 278,000 Dawsonville, GA Owned Office/Manufacturing/Warehouse 334,000 Detroit Lakes, MN Owned Office/Manufacturing/Warehouse 354,000 Lakeville, MN Leased Office/Manufacturing/Warehouse 413,000 Plastics Segment Fargo, ND Owned Office/Manufacturing/Warehouse 122,000 Phoenix, AZ Owned Office/Manufacturing/Warehouse 149,000 We believe the facilities described above are adequate for our present business.
Biggest change(2) As of December 31, 2025, OTP held a 14.8% ownership interest of 70 miles of the 230 kV transmission lines, with the remaining miles being wholly owned. 29 Table of Contents MANUFACTURING AND PLASTICS SEGMENTS The following reflects the properties of our Manufacturing and Plastic segments as of December 31, 2025 which are significant to our operations: Segment/Location Owned/Leased Facility Type/Use Approximate Square Feet Manufacturing Segment St.
ELECTRIC SEGMENT The following reflects our wholly or jointly owned material electric generation facilities as of December 31, 2024: Description Location Year Placed in Service Fuel Type Capacity - kW (Nameplate Rating) Big Stone Plant (1) Big Stone City, SD 1975 Subbituminous Coal 223,146 Coyote Station (2) Beulah, ND 1981 Lignite Coal 144,900 Jamestown Combustion Turbines Jamestown, ND 1975 Fuel Oil 48,108 Lake Preston Combustion Turbine Lake Preston, SD 1978 Fuel Oil 24,100 Solway Combustion Turbine Solway, MN 2003 Natural Gas/Fuel Oil 44,500 Astoria Station Astoria, SD 2021 Natural Gas 245,000 Langdon Wind Energy Center Cavalier County, ND 2007 Wind 40,500 Ashtabula Wind Energy Center Barnes County, ND 2008 Wind 48,000 Luverne Wind Energy Center Griggs and Steele Counties, ND 2009 Wind 49,500 Merricourt Wind Energy Center McIntosh and Dickey Counties, ND 2020 Wind 150,000 Ashtabula III Wind Energy Center (3) Barnes County, ND 2023 Wind 62,400 Hoot Lake Solar Otter Tail County, MN 2023 Solar 49,900 (1) OTP holds a 53.9% joint ownership interest in this jointly owned facility.
ELECTRIC SEGMENT The following reflects our wholly or jointly owned material electric generation facilities as of December 31, 2025: Description Location Year Placed in Service Fuel Type Capacity - kW (Nameplate Rating) Big Stone Plant (1) Big Stone City, SD 1975 Subbituminous Coal 256,025 Coyote Station (2) Beulah, ND 1981 Lignite Coal 149,450 Jamestown Combustion Turbines Jamestown, ND 1975 Fuel Oil 48,108 Lake Preston Combustion Turbine Lake Preston, SD 1978 Fuel Oil 24,100 Solway Combustion Turbine Solway, MN 2003 Natural Gas/Fuel Oil 44,500 Astoria Station Astoria, SD 2021 Natural Gas 245,000 Langdon Wind Energy Center Cavalier County, ND 2007 Wind 40,500 Ashtabula Wind Energy Center Barnes County, ND 2008 Wind 48,000 Luverne Wind Energy Center Griggs and Steele Counties, ND 2009 Wind 49,500 Merricourt Wind Energy Center McIntosh and Dickey Counties, ND 2020 Wind 150,000 Ashtabula III Wind Energy Center (3) Barnes County, ND 2023 Wind 62,400 Hoot Lake Solar Otter Tail County, MN 2023 Solar 49,900 (1) OTP holds a 53.9% joint ownership interest in this jointly owned facility.
ITEM 2. PROPERTIES The following provides a summary of our properties which are material to our operations, by segment, as of December 31, 2024.
ITEM 2. PROPERTIES The following provides a summary of our properties which are material to our operations, by segment, as of December 31, 2025.
In addition to our generation facilities, we wholly or jointly own transmission and distribution lines as of December 31, 2024 as follows: Miles Transmission 345 kV (1) 890 230 kV (2) 496 115 kV 974 Less than 115 kV 3,998 Distribution Less than 115 kV 7,870 (1) As of December 31, 2024, OTP held a 14.2% ownership interest of 242 miles, a 4.8% ownership interest of 250 miles, and a 50.0% ownership interest of 234 miles of the 345 kV transmission lines, with the remaining miles being wholly owned.
In addition to our generation facilities, we wholly or jointly own transmission and distribution lines as of December 31, 2025 as follows: Miles Transmission 345 kV (1) 891 230 kV (2) 494 115 kV 975 Less than 115 kV 3,990 Distribution Less than 115 kV 8,024 (1) As of December 31, 2025, OTP held a 14.2% ownership interest of 242 miles, a 4.8% ownership interest of 250 miles, and a 50.0% ownership interest of 234 miles of the 345 kV transmission lines, with the remaining miles being wholly owned.
Added
Cloud, MN Leased Warehouse 60,000 Otsego, MN Leased Manufacturing/Warehouse 86,000 Clearwater, MN Owned Office/Manufacturing/Warehouse 204,000 Washington, IL Leased Office/Manufacturing/Warehouse 218,000 Dawsonville, GA Owned Office/Manufacturing/Warehouse 335,000 Detroit Lakes, MN Owned Office/Manufacturing/Warehouse 360,000 Lakeville, MN Leased Office/Manufacturing/Warehouse 443,000 Plastics Segment Fargo, ND Owned Office/Manufacturing/Warehouse 122,000 Phoenix, AZ Owned Office/Manufacturing/Warehouse 144,000 We believe the facilities described above are adequate for our present business.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS Several class action complaints have been filed against certain PVC pipe manufacturers, including OTC, alleging, among other things, that the defendants conspired to fix, raise, maintain, and stabilize the price of PVC municipal water and electrical conduit pipe in violation of United States antitrust laws.
Biggest changeThe complaints allege, among other things, that our companies and the other defendants and alleged co-conspirators conspired to fix, raise, maintain, and stabilize the price of PVC municipal water, PVC plumbing pipe, PVC pipe fixtures and PVC conduit pipe in violation of United States federal and state antitrust laws, Canadian competition laws, and consumer protection and competition laws.
See Note 1 4 , Commitments and Contingencies, to the consolidated financial statements, which information is incorporated herein by reference, for further discussion of this matter.
See Note 14 , Commitments and Contingencies, to the consolidated financial statements, which information is incorporated herein by reference, for further discussion of this matter.
Added
ITEM 3. LEGAL PROCEEDINGS Several class action complaints have been filed against Northern Pipe Products, Vinyltech Corporation, Otter Tail Corporation and over 20 other parties.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePERFORMANCE GRAPH COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN This graph compares the cumulative total shareholder return on our common shares for the last five years with the cumulative return of the Nasdaq Stock Market Index and the Edison Electric Institute (EEI) Index over the same period (assuming the investment of $100 in each vehicle on December 31, 2019, and reinvestment of all dividends). 2019 2020 2021 2022 2023 2024 OTTR $ 100.00 $ 85.52 $ 147.06 $ 125.37 $ 185.62 $ 166.48 EEI $ 100.00 $ 98.84 $ 115.76 $ 117.09 $ 106.90 $ 127.32 Nasdaq $ 100.00 $ 121.27 $ 152.67 $ 122.55 $ 154.93 $ 192.86 ITEM 6. [RESERVED]
Biggest changePERFORMANCE GRAPH COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN This graph compares the cumulative total shareholder return (TSR) on our common shares for the last five years with the cumulative return of the Nasdaq Stock Market Index and the Edison Electric Institute (EEI) Index over the same period (assuming the investment of $100 in each vehicle on December 31, 2020, and reinvestment of all dividends). 2020 2021 2022 2023 2024 2025 OTTR $ 100.00 $ 170.99 $ 145.77 $ 215.82 $ 193.56 $ 219.89 EEI $ 100.00 $ 117.12 $ 118.47 $ 108.16 $ 128.82 $ 143.83 Nasdaq $ 100.00 $ 125.89 $ 101.05 $ 127.76 $ 159.03 $ 186.96 ITEM 6. [RESERVED]
We do not have a publicly announced stock repurchase program and we did not repurchase any equity securities during the quarter ended December 31, 2024.
We do not have a publicly announced stock repurchase program and we did not repurchase any equity securities during the quarter ended December 31, 2025.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the Nasdaq Global Select Market under the Nasdaq symbol “OTTR”. As of December 31, 2024, there were 10,245 holders of record of our common stock.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the Nasdaq Global Select Market under the Nasdaq symbol “OTTR”. As of December 31, 2025, there were 9,748 holders of record of our common stock.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeFinancial Statements: Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 47 Consolidated Balance Sheets 49 Consolidated Statements of Income 50 Consolidated Statements of Comprehensive Income 51 Consolidated Statements of Shareholders’ Equity 52 Consolidated Statements of Cash Flows 53 Notes to Consolidated Financial Statements 54
Biggest changeFinancial Statements: Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 46 Consolidated Balance Sheets 48 Consolidated Statements of Income 49 Consolidated Statements of Comprehensive Income 50 Consolidated Statements of Shareholders’ Equity 51 Consolidated Statements of Cash Flows 52 Notes to Consolidated Financial Statements 53

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

72 edited+48 added−58 removed31 unchanged
Biggest changeThe following table summarizes the impact on 2024 pension and postretirement costs for a 25 basis point increase or decrease, holding all other variables constant, on certain key assumptions: (in thousands) +0.25 -0.25 Pension Plan: Discount Rate $ (96) $ 931 Rate of Increase in Future Compensation 573 (424) Long-Term Return on Plan Assets (911) 911 Other Postretirement Benefits: Discount Rate (14) 15 For 2025, we expect pension and other postretirement benefit income to be $4.3 million compared to $8.5 million of income in 2024 due to the impacts of updated actuarial assumptions.
Biggest changeThe following table summarizes the discount rates used to measure our pension plan and other postretirement obligations, as well as the assumed rate of return on pension plan assets for our funded pension plan, as of December 31, 2025 and 2024: 2025 2024 change Pension Plan (Pension): Discount Rate 5.71 % 5.70 % 1 bp Long-Term Return on Plan Assets 7.00 % 7.00 % — Pension Plan (ESSRP): Discount Rate 5.46 % 5.60 % (14 bps) Other Postretirement Benefits: Discount Rate 5.47 % 5.61 % (14 bps) 43 Table of Contents The following table summarizes the impact on 2025 pension and postretirement costs of a 25-basis point increase or decrease, holding all other variables constant, on certain key assumptions: (in thousands) +0.25 -0.25 Discount Rate $ (807) $ 840 Rate of Increase in Future Compensation 1 515 (497) Long-Term Return on Plan Assets 2 (884) 884 1 Not applicable to the postretirement healthcare plan. 2 Not applicable to the ESSRP or postretirement healthcare plan.
LIQUIDITY LIQUIDITY OVERVIEW We believe our financial condition is strong and our cash and cash equivalents, other liquid assets, operating cash flows, existing lines of credit, access to capital markets and borrowing ability, because of investment-grade credit ratings, when taken together, provide us ample liquidity to conduct business operations, fund our capital expenditure program and satisfy our obligations as they become due.
LIQUIDITY LIQUIDITY OVERVIEW We believe our financial condition is strong and our cash and cash equivalents, other liquid assets, operating cash flows, existing lines of credit, access to capital markets and borrowing ability, because of investment-grade credit ratings, when taken together, provide us ample liquidity to conduct our business operations, fund our capital expenditure program and satisfy our obligations as they become due.
A 3% decrease in projected operating revenues, a one hundred basis point decrease in projected gross profit margins, a one hundred basis point decrease in projected terminal growth rate, a 50 basis point increase in weighted-average cost of capital or a 1.0x decrease in the assumed EBITDA multiple would not lead to a goodwill impairment charge for either reporting unit.
A 3% decrease in projected operating revenues, a one hundred basis point decrease in projected gross profit margins, a one hundred basis point decrease in the projected terminal growth rate, a 50 basis point increase in weighted-average cost of capital or a 1.0x decrease in the assumed EBITDA multiple would not lead to a goodwill impairment charge for either reporting unit.
We assess the probability of recovery of regulatory assets and the obligations arising from regulatory liabilities on a quarterly basis. Our probability estimates incorporate numerous factors, including recent rate making decisions, historical precedents for similar matters, the regulatory environments in which we operate and the impact these incurred costs may have on our customers.
We assess the probability of recovery of regulatory assets and the obligations arising from regulatory liabilities on a quarterly basis. Our probability estimates incorporate numerous factors, including recent rate-making decisions, historical precedents for similar matters, the current regulatory environments in which we operate and the impact these incurred costs may have on our customers.
This measure is commonly used in calculations relating to the energy consumption required to heat buildings. Cooling Degree Days (CDDs) is a measure of how much (in degrees), and for how long (in days), the outside air temperature was above a certain normalized level.
This measure is commonly used in calculations relating to the energy consumption required to heat buildings. Cooling Degree Days (CDDs) is a measure of how much (in degrees), and for how long (in days), the outside air temperature was above a certain normalized level. This measure is commonly used in calculations relating to the energy consumption required to cool buildings.
As of December 31, 2024, we were in compliance with these financial covenants as further described below: OTC, under its financial covenants, may not permit its ratio of interest-bearing debt to total capitalization to exceed 0.60 to 1.00 or 0.65 to 1.00, depending on the debt agreement, may not permit its interest and dividend coverage ratio to be less than 1.50 to 1.00 and may not permit its priority indebtedness to exceed 10% of our total capitalization.
As of December 31, 2025, we were in compliance with these financial covenants as further described below: OTC, under its financial covenants, may not permit its ratio of interest-bearing debt to total capitalization to exceed 0.60 to 1.00 or 0.65 to 1.00, depending on the debt agreement, may not permit its interest and dividend coverage ratio to be less than 1.50 to 1.00 and may not permit its priority indebtedness to exceed 10% of our total capitalization.
Accordingly, our utility business must adhere to the accounting requirements of regulated operations, which requires the recognition of regulatory assets and regulatory liabilities for amounts that otherwise would impact the statements of income or comprehensive income when it is probable that such amounts will be collected from customers or credited to customers through the rate-making process.
Accordingly, our utility business must adhere to the accounting requirements of regulated operations, which require the recognition of regulatory assets and regulatory liabilities for amounts that otherwise would impact the statements of income or comprehensive income when it is probable that such amounts will be collected from or credited to customers through the rate-making process.
Our goodwill impairment testing performed in the fourth quarter of 2024 indicated no impairment was present for either reporting unit and the estimated fair value of each reporting unit substantially exceeded the respective carrying value. As part of our testing, we perform various sensitivity analyses to understand if our conclusions are sensitive to changes in certain assumptions.
Our goodwill impairment testing performed in the fourth quarter of 2025 indicated no impairment was present for either reporting unit and the estimated fair value of each reporting unit substantially exceeded the respective carrying value. As part of our testing, we perform various sensitivity analyses to understand if our conclusions are sensitive to changes in certain assumptions.
Further, if we determine that all or a portion of our utility business no longer meets the criteria for continued application of regulatory accounting, or our regulators disallow recovery of a previously incurred cost or eliminate a regulatory liability, we would be required to remove the associated regulatory assets and liabilities from our consolidated balance sheets and recognize those amounts in the consolidated statements of income as an expense or income item, or in the consolidated statements of comprehensive income as a loss or gain, in the period in which this accounting treatment is no longer applicable.
Further, if we determine that all or a portion of our utility business no longer meets the criteria for continued application of regulatory accounting, or our regulators disallow recovery of a previously 42 Table of Contents incurred cost or eliminate a regulatory liability, we would be required to remove the associated regulatory assets and liabilities from our consolidated balance sheets and recognize those amounts in the consolidated statements of income as an expense or income item, or in the consolidated statements of comprehensive income as a loss or gain, in the period in which this accounting treatment is no longer applicable.
RATE CASES The following includes a summary of electric rate cases as determined in OTP's most recent general rate case in each state: Revenue Allowed Implementation Requirement Return on Return Equity Jurisdiction Date (in millions) Rate Base on Equity Ratio Minnesota 07/01/22 $ 209.0 7.18 % 9.48 % 52.50 % North Dakota (1)(2) 03/15/25 225.6 7.53 10.10 53.50 South Dakota (3) 08/01/19 35.5 7.09 8.75 52.92 (1) Includes an earnings sharing mechanism to share with North Dakota customers any earnings above an ROE of 10.20%.
RATE CASES The following includes a summary of electric rate cases as determined in OTP's most recently concluded general rate case in each state: Revenue Allowed Implementation Requirement Return on Return Equity Jurisdiction Date (in millions) Rate Base on Equity Ratio Minnesota 07/01/22 $ 209.0 7.18 % 9.48 % 52.50 % North Dakota (1) 03/15/25 225.6 7.53 10.10 53.50 South Dakota (2) 08/01/19 35.5 7.09 8.75 52.92 (1) Includes an earnings-sharing mechanism to share with North Dakota customers any earnings above an ROE of 10.20%.
Our discounted cash flow methodology incorporates significant estimates, which include assumptions of future operating results and cash flows, which are impacted by economic and industry conditions, the amount and timing of estimated capital expenditures, an 44 Table of Contents estimated terminal growth rate and the selection of an appropriate weighted-average cost of capital, among others.
Our discounted cash flow methodology incorporates significant estimates, which include assumptions of future operating results and cash flows, which are impacted by economic and industry conditions, the amount and timing of estimated capital expenditures, an estimated terminal growth rate and the selection of an appropriate weighted-average cost of capital, among others.
As a result of certain statutory limitations or regulatory or financing agreements, restrictions could occur on the amount of distributions allowed to be made by OTC subsidiaries to OTC. These intercompany distributions serve as the primary source of funding for dividends paid to our shareholders.
As a result of certain statutory 40 Table of Contents limitations or regulatory or financing agreements, restrictions could occur on the amount of distributions allowed to be made by OTC subsidiaries to OTC. These intercompany distributions serve as the primary source of funding for dividends paid to our shareholders.
Provided below is a summary and discussion of our operating results on a consolidated basis followed by a discussion of the operating results of each of our segments, Electric, Manufacturing and Plastics. In addition to the segment results, we provide an overview of our Corporate costs.
Provided below is a summary and discussion of our operating results on a consolidated basis followed by a discussion of the operating results of each of our segments, Electric, Manufacturing and Plastics. In addition to the segment results, we provide an 32 Table of Contents overview of our Corporate costs.
CAPITAL RESOURCES Financial flexibility is provided by operating cash flows, unused lines of credit, access to capital markets and alternative financing arrangements such as leasing. Debt financing will be required in the five-year period from 2025 through 2029 to refinance maturing debt and to finance our planned capital investments.
CAPITAL RESOURCES Financial flexibility is provided by operating cash flows, unused lines of credit, access to capital markets and alternative financing arrangements such as leasing. Debt financing will be required in the five-year period from 2026 through 2030 to refinance maturing debt and to finance our planned capital investments.
RESULTS OF OPERATIONS For a comparison of fiscal year 2023 to 2022, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 14, 2024.
RESULTS OF OPERATIONS For a comparison of fiscal year 2024 to 2023, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 19, 2025.
Significant adverse changes in our expectations for any of these estimates could result in an impairment charge in a future period which may materially impact our operating results and financial position.
Significant adverse changes in our expectations for any of these estimates could result in an impairment charge in a future period which may materially impact our operating results and financial position. 44 Table of Contents
Credit Ratings The current credit ratings of OTC and OTP are summarized below: Otter Tail Corporation Otter Tail Power Company Moody's Fitch S&P Moody's Fitch S&P Corporate Credit/Long-Term Issuer Default Rating Baa2 BBB BBB A3 BBB+ BBB+ Senior Unsecured Debt n/a BBB n/a n/a A- n/a Outlook Stable Stable Stable Negative Stable Stable 42 Table of Contents CRITICAL ACCOUNTING POLICIES INVOLVING SIGNIFICANT ESTIMATES The discussion and analysis of our results of operations are based on financial statements prepared in accordance with generally accepted accounting principles in the United States of America.
Credit Ratings The current credit ratings of OTC and OTP are summarized below: Otter Tail Corporation Otter Tail Power Company Moody's Fitch S&P Moody's Fitch S&P Corporate Credit/Long-Term Issuer Default Rating Baa2 BBB BBB Baa1 BBB+ BBB+ Senior Unsecured Debt n/a BBB n/a n/a A- n/a Outlook Stable Stable Positive Stable Stable Stable CRITICAL ACCOUNTING POLICIES INVOLVING SIGNIFICANT ESTIMATES The discussion and analysis of our results of operations are based on financial statements prepared in accordance with generally accepted accounting principles in the United States of America.
The proceeds of the notes were used to repay existing short-term borrowings, fund capital expenditures and for general corporate purposes. As of December 31, 2024, we had $947.0 million of principal outstanding under long-term debt arrangements. Note 10 to our consolidated financial statements included in this report on Form 10-K includes information regarding these instruments.
The proceeds of the notes were used to repay existing short-term borrowings, fund capital expenditures and for general corporate purposes. As of December 31, 2025, we had $1.0 billion of principal outstanding under long-term debt arrangements. Note 10 to our consolidated financial statements included in this report on Form 10-K includes information regarding these instruments.
REGISTRATION STATEMENTS On May 3, 2024, we filed two registration statements with the SEC, replacing two previously filed registration statements upon their expiration. The first statement, a shelf registration, allows us to offer for sale, from time to time, either separately or together in any combination, equity, debt or other securities described in the registration statement.
REGISTRATION STATEMENTS On May 3, 2024, we filed two registration statements with the SEC. The first statement, a shelf registration, allows us to offer for sale, from time to time, either separately or together in any combination, equity, debt or other securities described in the registration statement.
The agreements generally provide for unsecured borrowings at fixed rates of interest with maturities ranging from 2026 to 2054. Financial Covenants Our short- and long-term debt agreements require OTC and OTP to maintain certain financial covenants.
The agreements generally provide for unsecured borrowings at fixed rates of interest with maturities ranging from 2026 to 2055. 41 Table of Contents Financial Covenants Our short- and long-term debt agreements require OTC and OTP to maintain certain financial covenants.
Financing activities during the year included the issuance of $120.0 million of long-term debt at OTP, the proceeds of which were used to repay short-term borrowings under the OTP credit agreement, fund Electric segment construction expenditures and support operating activities.
Financing activities in 2025 included the issuance of $100.0 million of long-term debt at OTP, the proceeds of which were used to repay short-term borrowings under the OTP credit agreement, fund Electric segment construction expenditures and support operating activities. In 2024, financing activities included the issuance of $120.0 million of long-term debt at OTP.
In its filing, OTP requested a net increase in annual revenue of $17.4 million, or 8.4%, based on an allowed rate of return on rate base of 7.85% and an allowed rate of ROE of 10.6% on an equity ratio of 53.5% of total capital.
In its filing, OTP requested a net increase in annual revenue of $44.8 million, or 17.7%, based on an allowed rate of return on rate base of 7.92% and an allowed ROE of 10.65% on an equity ratio of 53.5% of total capital.
As of December 31, 2024, OTC's interest-bearing debt to total capitalization was 0.38 to 1.00, OTC's interest and dividend coverage ratio was 10.00 to 1.00 and OTC had no priority indebtedness outstanding.
As of December 31, 2025, OTC's interest-bearing debt to total capitalization was 0.38 to 1.00, OTC's interest and dividend coverage ratio was 8.02 to 1.00 and OTC had no priority indebtedness outstanding.
As of December 31, 2024, OTP's interest-bearing debt to total capitalization was 0.47 to 1.00, OTP's interest and dividend coverage ratio was 3.34 to 1.00 and OTP had no priority indebtedness outstanding.
As of December 31, 2025, OTP's interest-bearing debt to total capitalization was 0.47 to 1.00, OTP's interest and dividend coverage ratio was 2.97 to 1.00 and OTP had no priority indebtedness outstanding.
Our Manufacturing segment provides metal fabrication for custom machine parts and metal components, and manufactures extruded and thermoformed plastic products.
Our Manufacturing segment provides metal fabrication for custom machine parts and metal components, and manufactures extruded 31 Table of Contents and thermoformed plastic products.
See our segment disclosures below for additional discussion of items impacting operating expenses. Interest Expense increased $4.1 million in 2024 due to the issuance of an additional $120.0 million of long-term debt at OTP in March, the proceeds of which were used to repay short-term borrowings, fund capital expenditures and support operating activities.
See our segment disclosures below for additional discussion of items impacting operating expenses. Interest Expense increased $5.4 million in 2025 primarily due to the issuance of $100.0 million of long-term debt at OTP during the year, the proceeds of which were used to repay short-term borrowings, fund capital expenditures and support operating activities.
PIR - 2025 SD Requested 12/20/24 3.2 09/01/25 Recovery of Ashtabula III, Merricourt, Astoria Station, wind upgrade projects, advanced metering infrastructure, outage management system, demand response system, and impact of load growth credits. PIR - 2022 SD Approved 06/01/22 3.0 09/01/22 Recovery of Ashtabula III, Merricourt, Astoria Station, Advanced Grid Infrastructure project costs, and impact of load growth credits.
PIR - 2025 SD Approved 12/20/24 3.2 09/01/25 Recovery of Ashtabula III, Merricourt, Astoria Station, Abercrombie Solar, Solway Solar, wind upgrade projects, advanced metering infrastructure, outage management system, demand-response system, and impact of load-growth credits.
See Note 1 5 to our consolidated financial statements included in this report on Form 10-K for additional information. The decision to declare a dividend is reviewed quarterly by our Board of Directors. On February 4, 2025, our Board of Directors approved a quarterly dividend of $0.525 per common share.
See Note 15 to our consolidated financial statements included in this report on Form 10-K for additional information. The decision to declare a dividend is reviewed quarterly by our Board of Directors. On January 8, 2026, our Board of Directors approved a quarterly dividend of $0.5775 per common share.
(3) Includes an earnings sharing mechanism to share with South Dakota customers any weather-normalized earnings above the authorized ROE of 8.75%. The mechanism requires 50% of any weather-normalized revenue creating annual earnings in excess of the authorized ROE up to a maximum of 9.50% be returned to customers and 100% returns of revenue creating annual earnings above 9.50%.
The mechanism requires 50% of any weather-normalized revenue creating annual earnings in excess of the authorized ROE up to a maximum of 9.50% be returned to customers and 100% returns of revenue creating annual earnings above 9.50%.
The following is a summary of key provisions and borrowing information as of and for the year ended December 31, 2024: (in thousands, except interest rates) OTC Credit Agreement OTP Credit Agreement Borrowing Limit $ 170,000 $ 220,000 Borrowing Limit if Accordion Exercised 1 290,000 300,000 Amount Restricted Due to Outstanding Letters of Credit at Year-End — 8,772 Amount Outstanding at Year-End — 69,615 Average Amount Outstanding During Year — 38,475 Maximum Amount Outstanding During the Year — 102,024 Interest Rate at Year-End 5.83 % 5.61 % Expiration Date December 11, 2029 December 11, 2029 1 Each facility includes an accordion feature allowing the borrower to increase the borrowing limit if certain terms and conditions are met.
The following is a summary of key provisions and borrowing information as of and for the year ended December 31, 2025: (in thousands, except interest rates) OTC Credit Agreement OTP Credit Agreement Borrowing Limit $ 170,000 $ 220,000 Borrowing Limit if Accordion Exercised 1 290,000 300,000 Amount Restricted Due to Outstanding Letters of Credit at Year-End — 10,461 Amount Outstanding at Year-End — 60,242 Average Amount Outstanding During Year — 34,479 Maximum Amount Outstanding During the Year — 111,820 Interest Rate at Year-End 5.19 % 5.08 % Expiration Date December 11, 2030 December 11, 2030 1 Each facility includes an accordion feature allowing the borrower to increase the borrowing limit if certain terms and conditions are met.
As of December 31, 2024 and 2023, we had regulatory assets of $108.6 million and $111.8 million and regulatory liabilities of $318.2 million and $302.0 million.
As of December 31, 2025 and 2024, we had regulatory assets of $106.5 million and $108.6 million and regulatory liabilities of $314.0 million and $318.2 million.
The following table presents heating and cooling degree days as a percent of normal for the years ended December 31, 2024 and 2023: 2024 2023 Heating Degree Days 83.7 % 98.4 % Cooling Degree Days 93.8 % 127.2 % The following table summarizes the estimated effect on diluted earnings per share of the difference in retail sales under actual weather conditions and expected retail sales under normal weather conditions for the years ended December 31, 2024 and 2023, and between years: 2024 vs Normal 2024 vs 2023 2023 vs Normal Effect on Diluted Earnings Per Share $ (0.13) $ (0.15) $ 0.02 Retail Revenue decreased $2.6 million primarily due to the following: • A $13.4 million decrease in fuel recovery revenues, primarily due to lower purchased power costs, as described below. • A $8.1 million decrease in base revenues from the unfavorable impact of weather compared to last year.
The following table presents heating and cooling degree days as a percent of normal for the years ended December 31, 2025 and 2024: 2025 2024 Heating Degree Days 97.1 % 83.7 % Cooling Degree Days 102.5 % 93.8 % The following table summarizes the estimated effect on diluted earnings per share of the difference in retail sales under actual weather conditions and expected retail sales under normal weather conditions for the years ended December 31, 2025 and 2024, and between years: 2025 vs Normal 2025 vs 2024 2024 vs Normal Effect on Diluted Earnings Per Share $ (0.03) $ 0.10 $ (0.13) Retail Revenue increased $30.8 million primarily due to the following: • A $21.7 million increase in fuel recovery revenues due to higher purchased power and fuel costs, as described below. • An $8.7 million increase primarily from recovery of rate base investments. • A $6.1 million increase in sales volumes, exclusive of the impact of weather, primarily driven by increased customer usage. • A $5.7 million increase from the impact of favorable weather compared to last year.
A $50.1 million investment in U.S. treasuries made during the year to secure a fixed rate of return until their maturity in September 2026 also contributed to the increase in net cash used in investing activities.
Investing activities in 2024 also included a $50.1 million investment in U.S. treasuries, which was made to secure a fixed rate of return until their maturity in September 2026.
As of December 31, 2024, we had $311.6 million of available liquidity under our credit agreements and $294.7 million of available cash and cash equivalents, resulting in total available liquidity of $606.3 million, compared to total available liquidity of $479.8 million as of December 31, 2023.
As of December 31, 2025, we had $319.3 million of available liquidity under our credit agreements and $386.2 million of available cash and cash equivalents, resulting in total available liquidity of $705.5 million, compared to total available liquidity of $606.3 million as of December 31, 2024.
We manage the capital structure of OTP independently from our consolidated financial position to ensure compliance with the capital structure approved through regulation; therefore, our decision to issue long-term debt at OTP is not impacted by our consolidated cash and cash equivalent position.
We manage OTP's capital structure independently from our consolidated financial position to ensure compliance with the capital structure approved 39 Table of Contents through regulation. As a result, decisions related to the issuance of long-term debt at OTP are not influenced by our consolidated cash and cash equivalent position.
CASH FLOWS The following is a discussion of our cash flows for the years ended December 31, 2024 and 2023: (in thousands) 2024 2023 Net Cash Provided by Operating Activities $ 452,731 $ 404,499 Net Cash Provided by Operating Activities increased $48.2 million primarily due to a decrease in working capital and increased net income.
CASH FLOWS The following is a discussion of our cash flows for the years ended December 31, 2025 and 2024: (in thousands) 2025 2024 Net Cash Provided by Operating Activities $ 385,985 $ 452,731 Net Cash Provided by Operating Activities decreased $66.7 million primarily due to higher working capital requirements, largely in our Electric segment, and a decrease in earnings.
North Dakota Rate Case: On November 2, 2023, OTP filed a request with the NDPSC for an increase in revenue recoverable under general rates in North Dakota.
Minnesota Rate Case On October 31, 2025, OTP filed a request with the MPUC for an increase in revenue recoverable under general rates in Minnesota.
PENSION AND OTHER POSTRETIREMENT BENEFITS OBLIGATIONS AND COSTS Pension and postretirement benefit liabilities and expenses are determined by actuaries using numerous assumptions, including a discount rate, an expected return on plan assets, a rate of compensation increase and healthcare cost-trend rates.
PENSION AND OTHER POSTRETIREMENT BENEFITS OBLIGATIONS AND COSTS Pension and postretirement benefit liabilities and expenses are actuarially determined and incorporate numerous assumptions, including a discount rate, an expected return on plan assets, compensation changes, healthcare cost-trend rates and other demographic assumptions. These assumptions are reviewed annually, or more frequently under certain circumstances.
Our Plastics segment manufactures PVC pipe for use in, among other applications, municipal and rural water, wastewater and water reclamation projects. 31 Table of Contents 2024 FINANCIAL RESULTS In 2024, our diversified business model generated record financial results, producing net income of $301.7 million, or $7.17 per diluted share, an increase of 3% from $294.2 million, or $7.00 per diluted share, in 2023.
Our Plastics segment manufactures PVC pipe for use in, among other applications, municipal and rural water, wastewater and water reclamation projects. 2025 FINANCIAL RESULTS In 2025, our diversified business model generated strong financial results, producing net income of $275.9 million, or $6.55 per diluted share.
Financing activities during the year also included net repayments of short-term debt of $11.8 million compared to net short-term borrowings of $73.2 million in 2023, and in 2024, we made dividend payments of $78.3 million compared to $73.1 million in 2023.
Financing activities during 2025 also included net repayments of short-term debt of $9.4 million, compared with net repayments of $11.8 million in 2024. Dividend payments totaled $88.1 million in 2025, compared to $78.3 million in 2024.
GOODWILL IMPAIRMENT Goodwill is required to be evaluated annually for impairment and more frequently as events or circumstances require. Goodwill is tested for impairment at the reporting unit level. We have identified two reporting units which carry a material amount of goodwill, BTD Manufacturing, our contract metal fabrication business, and our Plastics segment.
Goodwill is tested for impairment at the reporting unit level. We have identified two reporting units which carry a material amount of goodwill, BTD Manufacturing, our contract metal fabrication business, and our Plastics segment. As of December 31, 2025, BTD Manufacturing and our Plastics segment carried goodwill balances of $18.1 million and $19.3 million, respectively.
LONG-TERM DEBT In March 2024, OTP entered into a Note Purchase Agreement pursuant to which OTP issued, in a private placement transaction, $120.0 million of senior unsecured notes consisting of (a) $60.0 million of 5.48% Series 2024A Senior Unsecured Notes due April 1, 2034, and (b) $60.0 million of 5.77% Series 2024B Senior Unsecured Notes due April 1, 2054.
LONG-TERM DEBT In March 2025, OTP entered into a Note Purchase Agreement pursuant to which OTP issued, in a private placement transaction, $100.0 million of senior unsecured notes consisting of (a) $50.0 million of 5.49% Series 2025A Senior Unsecured Notes due March 27, 2035, and (b) $50.0 million of 5.98% Series 2025B Senior Unsecured Notes due June 5, 2055.
The mechanism requires 70% of any revenue creating annual earnings in excess of the authorized ROE be returned to customers.
The mechanism requires 70% of any revenue creating annual earnings in excess of the authorized ROE be returned to customers. (2) Includes an earnings-sharing mechanism to share with South Dakota customers any weather-normalized earnings above the authorized ROE of 8.75%.
Other Income increased $4.6 million primarily due to an increase in investment income earned on our short-term cash equivalent investments and our long-term fixed income investments, primarily due to additional investments made during the year driven by an increase in cash available for investment. 36 Table of Contents REGULATORY MATTERS The following provides a summary of OTP's current and recent rate case filings, rate rider filings, and other regulatory filings that have or are expected to have a material impact on our operating results, financial position or cash flows.
Income Tax Benefit decreased $2.1 million primarily due to a decrease in loss before taxes. 36 Table of Contents REGULATORY MATTERS The following provides a summary of OTP's current and recent rate case filings, rate rider filings, and other regulatory filings that have, or are expected to have, a material impact on our operating results, financial position or cash flows.
RRR - 2024 MN Approved 12/04/23 8.0 09/01/24 Recovery of Hoot Lake Solar costs, Ashtabula III costs, wind upgrade project costs at our four owned wind facilities, and true up of PTCs for Merricourt. EUIC - 2025 MN Approved 05/03/24 4.1 02/01/25 Recovery of advanced metering infrastructure, outage management system, geographic information system, and demand response projects.
ECO - 2024 MN Approved 04/01/24 8.8 10/01/24 Recovery of energy conservation improvement costs as well as a demand-side management financial incentive. RRR - 2024 MN Approved 12/04/23 8.0 09/01/24 Recovery of Hoot Lake Solar costs, Ashtabula III costs, wind upgrade project costs at our four owned wind facilities, and true up of PTCs for Merricourt.
The following table presents the status of our lines of credit as of December 31, 2024: 2024 (in thousands) Line Limit Amount Outstanding Letters of Credit Amount Available OTC Credit Agreement $ 170,000 $ — $ — $ 170,000 OTP Credit Agreement 220,000 69,615 8,772 141,613 Total $ 390,000 $ 69,615 $ 8,772 $ 311,613 OTC and OTP are each party to separate credit agreements (the OTC Credit Agreement and OTP Credit Agreement, respectively) which provide for unsecured revolving lines of credit.
As of December 31, 2025, we were in compliance with all financial covenants (see the Financial Covenant section under Capital Resources below). 38 Table of Contents The following table presents the status of our lines of credit as of December 31, 2025: 2025 (in thousands) Line Limit Amount Outstanding Letters of Credit Amount Available OTC Credit Agreement $ 170,000 $ — $ — $ 170,000 OTP Credit Agreement 220,000 60,242 10,461 149,297 Total $ 390,000 $ 60,242 $ 10,461 $ 319,297 OTC and OTP are each party to separate credit agreements (the OTC Credit Agreement and OTP Credit Agreement, respectively) which provide for unsecured revolving lines of credit.
TCR - 2025 ND Approved 09/16/24 3.1 01/01/25 Recovery of transmission project costs. PIR - 2024 SD Approved 06/03/24 3.2 09/01/24 Recovery of Ashtabula III, Merricourt, Astoria Station, wind upgrade projects, Advanced Grid Infrastructure project costs, and impact of load growth credits.
PIR - 2024 SD Approved 06/03/24 3.2 09/01/24 Recovery of Ashtabula III, Merricourt, Astoria Station, wind upgrade projects, Advanced Grid Infrastructure project costs, and impact of load-growth credits. OTHER In July 2025, the utility commissions from five states, including the NDPSC, filed a complaint with FERC challenging MISO’s analysis supporting the benefits of MISO’s Tranche 2.1 portfolio of transmission projects.
Selling, General, and Administrative Expenses increased $4.3 million due to costs associated with ongoing litigation regarding the pricing of PVC pipe, which is further described in Note 1 4 to the consolidated financial statements, as well as increased variable costs associated with our increase in sales volumes and current year financial performance.
Selling, General, and Administrative Expenses increased $1.0 million primarily due to costs associated with ongoing litigation and related matters regarding the pricing of PVC pipe, which is further described in Note 14 to the consolidated financial statements. There is considerable uncertainty regarding the timing of significant developments or the resolution of these matters.
TCR - 2024 ND Approved 11/02/23 4.5 01/01/24 Recovery of transmission project costs. GCR - 2022 ND Approved 03/01/22 3.3 07/01/22 Annual update to generation cost recovery rider. MDT - 2023 ND Approved 07/08/22 3.1 01/01/23 Recovery of advanced metering infrastructure, outage management system and demand response projects.
EUIC - 2025 MN Approved 05/03/24 4.1 02/01/25 Recovery of advanced metering infrastructure, outage management system, geographic information system, and demand-response projects. TCR - 2026 ND Approved 09/15/25 5.1 02/01/26 Recovery of transmission project costs. TCR - 2024 ND Approved 11/02/23 4.5 01/01/24 Recovery of transmission project costs.
(in millions) Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Debt Obligations $ 1,017 $ 70 $ 122 $ 70 $ 755 Interest on Debt Obligations 700 42 81 71 506 Coal Contracts 441 24 50 53 314 Land Easements 62 2 4 4 52 Postretirement Benefit Obligations 65 5 11 11 38 Operating Lease Obligations 35 6 10 6 13 Other Obligations 11 2 2 1 6 Total Contractual Obligations $ 2,331 $ 151 $ 280 $ 216 $ 1,684 Coal contract obligations are based on estimated coal consumption and costs for the delivery of coal to Coyote Station from Coyote Creek Mining Company (CCMC) under the Lignite Sales Agreement (LSA) that ends in 2040.
(in millions) Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Debt Obligations $ 1,107 $ 140 $ 42 $ 120 $ 805 Interest on Debt Obligations 773 47 87 79 560 Coal Contract Obligations 417 24 51 53 289 Equipment Purchase Obligations 53 12 41 — — Land Easement Payments 56 2 4 4 46 Postretirement Benefit Obligations 70 6 12 12 40 Operating Lease Obligations 34 7 10 6 11 Other Obligations 23 4 8 5 6 Total Contractual Obligations $ 2,533 $ 242 $ 255 $ 279 $ 1,757 Coal contract obligations are based on estimated coal consumption and costs for the delivery of coal to Coyote Station from Coyote Creek Mining Company (CCMC) under the Lignite Sales Agreement (LSA) that ends in 2040.
Our earnings mix in 2024 was 30% from our Electric segment and 70% from the combination of our Manufacturing and Plastics segments including unallocated corporate costs. Since 2021, our earnings mix has diverged from our long-term target of 65% from our Electric segment and 35% from our Manufacturing Platform primarily due to market conditions within the PVC pipe industry.
Since 2021, this mix has diverged from our long‑term target of 70% Electric and 30% Manufacturing Platform, largely due to market conditions in the PVC pipe industry. These conditions have resulted in elevated revenue, earnings, and cash flow in our Plastics segment. We currently expect industry conditions within the PVC pipe market to gradually normalize through 2027.
This measure is commonly used in calculations relating to the energy consumption required to cool buildings. 32 Table of Contents OTP generally bases its forecasted kwh sales and rates on expected consumption under a normal level of HDDs and CDDs over a given period of time in its service territory.
OTP generally bases its forecasted kwh sales and rates on expected consumption under a normal level of HDDs and CDDs over a given period of time in its service territory. We present HDDs and CDDs to provide an indication of the impact of weather on kwh sales, revenues and earnings relative to forecast, and on period-to-period results.
MANUFACTURING SEGMENT RESULTS The following table summarizes the operating results of our Manufacturing segment for the years ended December 31, 2024 and 2023: (in thousands) 2024 2023 $ change % change Operating Revenues $ 342,592 $ 402,781 $ (60,189) (14.9) % Cost of Products Sold (excluding depreciation) 267,904 310,601 (42,697) (13.7) Selling, General, and Administrative Expenses 35,203 44,545 (9,342) (21.0) Depreciation and Amortization 20,393 18,495 1,898 10.3 Operating Income 19,092 29,140 (10,048) (34.5) Interest Expense (2,516) (2,295) (221) 9.6 Other Income — (1) 1 (100.0) Income Before Income Taxes 16,576 26,844 (10,268) (38.3) Income Tax Expense 2,895 5,390 (2,495) (46.3) Net Income $ 13,681 $ 21,454 $ (7,773) (36.2) % Operating Revenues decreased $60.2 million primarily due to a 15% decrease in sales volumes, with declines experienced in the recreational vehicle, agriculture, construction, lawn and garden, and horticulture end markets.
MANUFACTURING SEGMENT RESULTS The following table summarizes the operating results of our Manufacturing segment for the years ended December 31, 2025 and 2024: (in thousands) 2025 2024 $ change % change Operating Revenues $ 314,547 $ 342,592 $ (28,045) (8.2) % Cost of Products Sold (excluding depreciation) 238,790 267,904 (29,114) (10.9) Selling, General, and Administrative Expenses 37,575 35,203 2,372 6.7 Depreciation and Amortization 21,282 20,393 889 4.4 Operating Income 16,900 19,092 (2,192) (11.5) Interest Expense (2,506) (2,516) 10 (0.4) Income Before Income Taxes 14,394 16,576 (2,182) (13.2) Income Tax Expense 2,877 2,895 (18) (0.6) Net Income $ 11,517 $ 13,681 $ (2,164) (15.8) % Operating Revenues decreased $28.0 million primarily driven by a 7% decline in sales volumes at our metal fabrication business, with reductions across several end markets, including agriculture, lawn and garden and recreational vehicles.
Shares purchased under the plan may be newly issued common shares or common shares purchased on the open market. As of December 31, 2024, there were 1,429,531 shares available for purchase or issuance under the plan.
Shares purchased under the plan may be newly issued common shares or common shares purchased on the open market. As of December 31, 2025, there were 1,330,821 shares available for purchase or issuance under the plan. Both registration statements expire in May 2027. SHORT-TERM DEBT The OTC Credit Agreement and OTP Credit Agreement provide for unsecured revolving lines of credit.
The following provides a summary of capital expenditures for the years ended December 31, 2024 and 2023 for our Electric segment and non-electric businesses and anticipated capital expenditures for the five-year period 2025 through 2029: (in millions) 2023 2024 2025 2026 2027 2028 2029 Total 2025 - 2029 Electric Segment: Renewable Generation $ 106 $ 134 $ 101 $ 127 $ 118 $ 179 $ 4 $ 529 Transmission 49 60 59 93 162 114 100 528 Distribution 45 46 37 37 36 37 34 181 Other 41 61 54 51 31 27 25 188 Total Electric Segment 241 301 251 308 347 357 163 1,426 Manufacturing and Plastics Segments 46 58 27 27 27 25 23 129 Total Capital Expenditures $ 287 $ 359 $ 278 $ 335 $ 374 $ 382 $ 186 $ 1,555 40 Table of Contents CONTRACTUAL AND OTHER OBLIGATIONS The following table summarizes our contractual obligations on December 31, 2024 and the effect these obligations are expected to have on our liquidity and cash flow in future periods.
The following provides a summary of capital expenditures for the years ended December 31, 2025 and 2024 for our Electric segment and non-electric businesses and anticipated capital expenditures for the five-year period from 2026 through 2030: (in millions) 2024 2025 2026 2027 2028 2029 2030 Total 2026 - 2030 Electric Segment: Renewable Generation and Storage $ 134 $ 91 $ 251 $ 295 $ 89 $ 4 $ 6 $ 645 Transmission 60 50 80 167 167 186 255 855 Distribution 46 88 55 49 53 54 57 268 Other 61 42 50 36 24 23 20 153 Total Electric Segment 301 271 436 547 333 267 338 1,921 Manufacturing and Plastics Segments 58 17 31 27 29 23 19 129 Total Capital Expenditures $ 359 $ 288 $ 467 $ 574 $ 362 $ 290 $ 357 $ 2,050 CONTRACTUAL AND OTHER OBLIGATIONS The following table summarizes our contractual obligations on December 31, 2025 and the effect these obligations are expected to have on our liquidity and cash flow in future periods.
Closing of the transaction is expected to occur in late 2025 or early 2026. COMMON STOCK DIVIDENDS We paid dividends to our shareholders totaling $78.3 million, or $1.87 per share, in 2024.
COMMON STOCK DIVIDENDS We paid dividends to our shareholders totaling $88.1 million, or $2.10 per share, in 2025.
(in thousands) 2024 2023 Net Cash Provided by (Used in) Financing Activities $ 22,921 $ (3,835) Net Cash Provided by (Used in) Financing Activities increased $26.8 million compared to the prior year.
(in thousands) 2025 2024 Net Cash Provided by (Used in) Financing Activities $ (3,719) $ 22,921 Net Cash Used in Financing Activities totaled $3.7 million in 2025, compared with $22.9 million of net cash provided by financing activities in 2024.
The key provisions of the order include a revenue requirement of $225.6 million, based on a return on rate base of 7.53%, and an allowed ROE of 10.10% on an equity ratio of 53.5%. The net annual revenue requirement includes a net increase of $13.1 million, or 6.18%.
In its filing, OTP requested a net increase in annual revenue of $5.7 million, or 12.50%, based on an allowed rate of return on rate base of 8.29% and an allowed ROE of 10.80% on an equity ratio of 53.54% of total capital.
CORPORATE The following table summarizes Corporate results of operations for the years ended December 31, 2024 and 2023: (in thousands) 2024 2023 $ change % change Selling, General, and Administrative Expenses $ 24,438 $ 12,042 $ 12,396 102.9 % Depreciation and Amortization 98 102 (4) (3.9) Operating Income (Loss) (24,536) (12,144) (12,392) 102.0 Interest Expense (493) (916) 423 (46.2) Nonservice Cost Components of Postretirement Benefits (969) (1,064) 95 (8.9) Other Income 15,504 10,883 4,621 42.5 Income (Loss) Before Income Taxes (10,494) (3,241) (7,253) 223.8 Income Tax (Benefit) (6,765) (3,806) (2,959) 77.7 Net Income (Loss) $ (3,729) $ 565 $ (4,294) (760.0) % Selling, General, and Administrative Expenses increased $12.4 million primarily due to increased insurance expense driven by higher claims costs associated with our self-funded insurance programs, as well as increased variable compensation based on the current year financial performance.
CORPORATE The following table summarizes Corporate results of operations for the years ended December 31, 2025 and 2024: (in thousands) 2025 2024 $ change % change Selling, General, and Administrative Expenses $ 23,611 $ 24,438 $ (827) (3.4) % Depreciation and Amortization 235 98 137 139.8 Operating Loss 23,846 24,536 (690) (2.8) Interest Expense (402) (493) 91 (18.5) Nonservice Cost Components of Postretirement Benefits (1,091) (969) (122) 12.6 Other Income 17,036 15,504 1,532 9.9 Loss Before Income Taxes 8,303 10,494 (2,191) (20.9) Income Tax Benefit (4,693) (6,765) 2,072 (30.6) Net Loss $ 3,610 $ 3,729 $ (119) 3.2 % Other Income increased $1.5 million driven by higher investment income earned on our short-term investments resulting from increased cash available for investment, as well as gains on our corporate-owned life insurance policies.
We anticipate our cash from operations in future years will decline from current levels consistent with the anticipated decline in Plastics segment earnings. 39 Table of Contents (in thousands) 2024 2023 Net Cash Used in Investing Activities $ 411,374 $ 289,287 Net Cash Used in Investment Activities increased $122.1 million primarily due to an increase in capital expenditures.
We expect cash provided by operating activities in future years to decline from recent levels, consistent with the anticipated normalization of earnings in the Plastics segment. (in thousands) 2025 2024 Net Cash Used in Investing Activities $ 290,724 $ 411,374 Net Cash Used in Investment Activities decreased $120.7 million, primarily the result of a $70.6 million decrease in capital expenditures.
See Note 1 3 to our consolidated financial statements included in this report on Form 10-K for additional information regarding factors impacting our effective tax rate. 33 Table of Contents ELECTRIC SEGMENT RESULTS The following table summarizes the operating results of our Electric segment for the years ended December 31, 2024 and 2023: (in thousands) 2024 2023 $ change % change Retail Revenue $ 453,214 $ 455,840 $ (2,626) (0.6) % Transmission Services Revenue 53,517 52,555 962 1.8 Wholesale Revenue 11,077 12,459 (1,382) (11.1) Other Electric Revenues 6,707 7,505 (798) (10.6) Total Operating Revenue 524,515 528,359 (3,844) (0.7) Production Fuel 60,945 60,339 606 1.0 Purchased Power 61,561 78,292 (16,731) (21.4) Operating and Maintenance Expenses 190,422 191,263 (841) (0.4) Depreciation and Amortization 82,136 75,330 6,806 9.0 Property Taxes 15,662 16,614 (952) (5.7) Operating Income 113,789 106,521 7,268 6.8 Interest Expense (38,216) (33,864) (4,352) 12.9 Nonservice Cost Components of Postretirement Benefits 10,578 11,661 (1,083) (9.3) Other Income 3,268 1,754 1,514 86.3 Income Before Income Taxes 89,419 86,072 3,347 3.9 Income Tax (Benefit) Expense (1,544) 1,648 (3,192) (193.7) Net Income $ 90,963 $ 84,424 $ 6,539 7.7 % Electric kwh Sales (in thousands) 2024 2023 kwh change % change Retail kwh Sales 5,681,268 5,772,215 (90,947) (1.6) % Wholesale kwh Sales 273,365 351,729 (78,364) (22.3) Heating Degree Days 5,313 6,259 (946) (15.1) Cooling Degree Days 440 590 (150) (25.4) % Our Electric segment operating results are impacted by fluctuations in weather conditions and the resulting demand for electricity for heating and cooling.
Our effective tax rate was 14.4% in 2025 and 17.8% in 2024, with the decrease primarily driven by the increase in PTCs. 33 Table of Contents ELECTRIC SEGMENT RESULTS The following table summarizes the operating results of our Electric segment for the years ended December 31, 2025 and 2024: (in thousands) 2025 2024 $ change % change Retail Revenue $ 484,016 $ 453,214 $ 30,802 6.8 % Transmission Services Revenue 54,656 53,517 1,139 2.1 Wholesale Revenue 21,121 11,077 10,044 90.7 Other Electric Revenues 6,963 6,707 256 3.8 Total Operating Revenue 566,756 524,515 42,241 8.1 Production Fuel 75,048 60,945 14,103 23.1 Purchased Power 78,658 61,561 17,097 27.8 Operating and Maintenance Expenses 184,310 190,422 (6,112) (3.2) Depreciation and Amortization 90,168 82,136 8,032 9.8 Property Taxes 17,023 15,662 1,361 8.7 Operating Income 121,549 113,789 7,760 6.8 Interest Expense (43,633) (38,216) (5,417) 14.2 Nonservice Cost Components of Postretirement Benefits 4,425 10,578 (6,153) (58.2) Other Income 3,446 3,268 178 5.4 Income Before Income Taxes 85,787 89,419 (3,632) (4.1) Income Tax Benefit (11,799) (1,544) (10,255) 664.2 Net Income $ 97,586 $ 90,963 $ 6,623 7.3 % Electric kwh Sales (in thousands) 2025 2024 kwh change % change Retail kwh Sales 5,917,736 5,681,268 236,468 4.2 % Wholesale kwh Sales 404,750 273,365 131,385 48.1 Heating Degree Days 6,117 5,313 804 15.1 Cooling Degree Days 492 440 52 11.8 % Our Electric segment operating results are impacted by fluctuations in weather conditions and the resulting demand for electricity for heating and cooling.
Depreciation and Amortization increased $1.9 million due to capital expenditures during the year, which included investments in facility improvements and purchases of equipment. 35 Table of Contents PLASTICS SEGMENT RESULTS The following table summarizes the operating results for our Plastics segment for the years ended December 31, 2024 and 2023: (in thousands) 2024 2023 $ change % change Operating Revenues $ 463,441 $ 418,026 $ 45,415 10.9 % Cost of Products Sold (excluding depreciation) 166,628 143,521 23,107 16.1 Selling, General, and Administrative Expenses 20,414 16,076 4,338 27.0 Depreciation and Amortization 4,494 4,027 467 11.6 Operating Income 271,905 254,402 17,503 6.9 Interest Expense (590) (602) 12 (2.0) Other Income 76 14 62 442.9 Income Before Income Taxes 271,391 253,814 17,577 6.9 Income Tax Expense 70,644 66,066 4,578 6.9 Net Income $ 200,747 $ 187,748 $ 12,999 6.9 % Operating Revenues increased $45.4 million primarily due to a 27% increase in sales volumes driven by customer sales volume growth and strong distributor and end market demand.
Depreciation and Amortization expense increased $0.9 million, largely driven by our facility expansion and new equipment at our BTD location in Georgia, which were placed into service in early 2025. 35 Table of Contents PLASTICS SEGMENT RESULTS The following table summarizes the operating results for our Plastics segment for the years ended December 31, 2025 and 2024: (in thousands) 2025 2024 $ change % change Operating Revenues $ 422,755 $ 463,441 $ (40,686) (8.8) % Cost of Products Sold (excluding depreciation) 163,874 166,628 (2,754) (1.7) Selling, General, and Administrative Expenses 21,380 20,414 966 4.7 Depreciation and Amortization 6,422 4,494 1,928 42.9 Operating Income 231,079 271,905 (40,826) (15.0) Interest Expense (685) (590) (95) 16.1 Other Income 5 76 (71) (93.4) Income Before Income Taxes 230,399 271,391 (40,992) (15.1) Income Tax Expense 59,999 70,644 (10,645) (15.1) Net Income $ 170,400 $ 200,747 $ (30,347) (15.1) % Operating Revenues decreased $40.7 million primarily driven by a 15% decline in sales prices compared to last year.
CONSOLIDATED RESULTS The following table summarizes our consolidated results of operations for the years ended December 31, 2024 and 2023: (in thousands) 2024 2023 $ change % change Operating Revenues $ 1,330,548 $ 1,349,166 $ (18,618) (1.4) % Operating Expenses 950,298 971,247 (20,949) (2.2) Operating Income 380,250 377,919 2,331 0.6 Interest Expense (41,815) (37,677) (4,138) 11.0 Nonservice Components of Postretirement Benefits 9,609 10,597 (988) (9.3) Other Income 18,848 12,650 6,198 49.0 Income Before Income Taxes 366,892 363,489 3,403 0.9 Income Tax Expense 65,230 69,298 (4,068) (5.9) Net Income $ 301,662 $ 294,191 $ 7,471 2.5 % Operating Revenues decreased $18.6 million on a consolidated basis in 2024.
CONSOLIDATED RESULTS The following table summarizes our consolidated results of operations for the years ended December 31, 2025 and 2024: (in thousands) 2025 2024 $ change % change Operating Revenues $ 1,304,058 $ 1,330,548 $ (26,490) (2.0) % Operating Expenses 958,376 950,298 8,078 0.9 Operating Income 345,682 380,250 (34,568) (9.1) Interest Expense (47,226) (41,815) (5,411) 12.9 Nonservice Components of Postretirement Benefits 3,334 9,609 (6,275) (65.3) Other Income 20,487 18,848 1,639 8.7 Income Before Income Taxes 322,277 366,892 (44,615) (12.2) Income Tax Expense 46,384 65,230 (18,846) (28.9) Net Income $ 275,893 $ 301,662 $ (25,769) (8.5) % Operating Revenues decreased $26.5 million in 2025 primarily due to decreased sales prices in our Plastics segment and decreased sales volumes in our Manufacturing segment, partially offset by increased sales volumes in our Plastics segment as well as increased fuel recovery revenues and sales volumes in our Electric segment.
We estimate the assumed long-term rate of return on plan assets based on asset category studies using historical market returns achieved by our asset portfolio allocation over long-term periods, as well as long-term projected return levels. Other assumptions are developed by reference to available trend or historical data adjusted as necessary for future expectations.
Expected Return on Plan Assets - we estimate the long-term expected rate of return on pension plan assets based on asset category studies using historical returns and forward-looking capital market assumptions based on our asset allocation. Differences between expected and actual returns are recognized as actuarial gains or losses and amortized to expense over time.
Interest Expense increased $4.4 million due to the issuance of an additional $120.0 million of long-term debt in March, partially offset by lower interest on short-term borrowings due to lower average borrowings and interest rates compared to the prior year.
Interest Expense increased $5.4 million primarily due to the issuance of an additional $100.0 million of long-term debt during the year, the proceeds of which were primarily used to repay short-term debt and fund our capital investments.
The weighted-average interest rate on all outstanding borrowings as of December 31, 2024 and 2023 was 5.61% and 6.70%.
Outstanding balances under these facilities bear interest at a variable rate comprised of a benchmark rate plus an applicable credit spread, which is subject to adjustment based on the credit ratings of the borrower. The weighted-average interest rate on all outstanding borrowings as of December 31, 2025 and 2024 was 5.08% and 5.61%.
Electric segment operating revenues decreased 1% primarily due to decreased fuel recovery and wholesale revenues and the impact of unfavorable weather, partially offset by retail revenue increases due to an interim rate increase in North Dakota in connection with our most recent rate case, as well as increased commercial and industrial sales volumes, and increased rider revenue.
Operating Expenses increased $8.1 million in 2025 primarily due to an increase in purchased power costs, production fuel costs, and depreciation expense in our Electric segment, partially offset by lower cost of goods sold driven by decreased sales volumes in our Manufacturing segment and the impact of lower material costs in our Plastics segment, as well as lower operating and maintenance expenses in our Electric segment.
Market dynamics experienced by our Plastics segment businesses in 2024 and 2023 resulted in a significant increase in our overall cash from operations compared to prior periods.
As a result, cash provided by operating activities may differ significantly from net income in any given reporting period. Market dynamics experienced by our Plastics segment businesses in 2025 and 2024 contributed to a substantial increase in consolidated cash from operations over this period.
Increased operating revenues, driven by increased sales volumes, were partially offset by a decrease in gross profit margins. Gross profit margins decreased primarily due to decreases in sales prices, which outpaced decreases in the cost of PVC resin and other input materials.
Cost of Products Sold decreased $2.8 million primarily reflecting a 14% reduction in the cost of input materials, including PVC resin. The reduction in PVC resin cost was driven by global supply and demand dynamics which has resulted in elevated resin supply. This decrease was partially offset by higher sales volumes, as discussed above.
Selling, General, and Administrative Expenses decreased $9.3 million primarily due to decreased employee compensation costs resulting from a decrease in headcount and lower variable compensation driven by financial performance in the current year.
Selling, General, and Administrative Expenses increased $2.4 million primarily due to variable compensation costs.
Also, a change in the expected rate of return on pension plan assets in our funded pension plan or realized rates of return on plan assets that are well above or below assumed rates of return or a change in the anticipated life expectancy of plan participants could result in significant increases or decreases in recognized pension benefit expenses in the year of the change or for many years thereafter because actuarial losses can be amortized over the average remaining service lives of active employees. 43 Table of Contents We estimate the discount rate through the use of a hypothetical bond portfolio method, which incorporates yields on a collection of high credit quality bonds that produce cash flows similar to our anticipated future benefit payments.
We estimate the discount rate using a hypothetical bond portfolio method, which incorporates yields on a collection of high credit quality bonds that produce cash flows similar to our anticipated future benefit payments. Lower discount rates increase the benefit obligation and future pension expense, while higher discount rates reduce such amounts.
Our financial results for the year were driven by earnings growth in our Electric and Plastics segments, partially offset by a decline in our Manufacturing segment earnings. In 2024, we paid an annual dividend of $1.87 per share, or $78.3 million, completing our 86th consecutive year of dividend payments to our shareholders.
We paid dividends totaling $2.10 per share, or $88.1 million, marking our 87th consecutive year of dividend payments to our shareholders. Our Electric segment generated 7% earnings growth in 2025, producing earnings of $97.6 million.
Removed
Our Electric segment produced earnings growth of 8% in 2024, from $84.4 million in 2023 to $91.0 million in 2024, primarily due to increased retail revenue resulting from an interim rate increase in North Dakota and increased rider revenue, partially offset by the investment and financing costs associated with our rate base investments, resulting in increased depreciation and interest expense compared to the prior year.
Added
As expected, our earnings declined from the record level achieved in 2024 when we generated earnings of $301.7 million, or $7.17 per diluted share. As we anticipated, product prices within our Plastics segment continued to decline in 2025 leading to the reduction in earnings compared to the prior year.
Removed
Our Manufacturing segment earnings decreased 36% in 2024, from $21.5 million in 2023 to $13.7 million in 2024, primarily due to soft end market demand, which resulted in lower sales volumes and a decrease in gross profit margins in our plastics thermoforming business, partially offset by reduced general and administrative expenses.
Added
We anticipate earnings from our Plastics segment will continue to decline through 2027 until such time that product pricing is expected to stabilize. We generated $386.0 million of cash from operations in 2025 and ended the year with total available liquidity of $705.5 million. Our year-end equity ratio to total capital was 62.8%.
Removed
Decreased profit margins were primarily due to reduced leveraging of fixed manufacturing costs resulting from decreased production and sales volumes. Our Plastics segment produced earnings growth of 7%, from $187.7 million in 2023 to $200.7 million in 2024, primarily due to the impact of increased sales volumes, driven by strong customer and end market demand.
Added
Our earnings growth was driven by the recovery of our rate base investments, which include investments in new generation and enhancements to our transmission and distribution system to promote reliable electric service.
Removed
These conditions have led to significant revenue, earnings and cash flow growth in our Plastics segment. Currently, we expect these industry conditions to gradually normalize through 2027. As they do, we expect earnings and cash flow generation within our Plastics segment to moderate from current levels and our earnings mix to return to our long-term targeted mix.
Added
We also benefited from increased sales volumes in 2025, partially the result of favorable weather conditions compared to last year which impacted our customers' demand for energy, and lower operating and maintenance costs. Earnings in our Manufacturing segment decreased 16% in 2025 to $11.5 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+0 added−0 removed5 unchanged
Biggest changeAs of December 31, 2024, OTP was party to financial swap agreements with an aggregate notional amount of 167,200 megawatt-hours of electricity with various settlement dates throughout 2025. As of December 31, 2024, the aggregate fair value of these instruments was $2.0 million, reflected as a liability on our consolidated balance sheets.
Biggest changeAs of December 31, 2025, OTP was party to financial swap agreements with an aggregate notional amount of 310,600 megawatt-hours of electricity with various settlement dates throughout 2026. As of December 31, 2025, the aggregate fair value of these instruments was a net $2.6 million liability.
We maintain a ratio of fixed-rate debt to total debt within a certain range. It is our policy to enter into interest rate transactions and other financial 45 Table of Contents instruments only to the extent considered necessary to meet our stated objectives. We do not enter into interest rate transactions for speculative or trading purposes. 46 Table of Contents
We maintain a ratio of fixed-rate debt to total debt within a certain range. It is our policy to enter into interest rate transactions and other financial instruments only to the extent considered necessary to meet our stated objectives. We do not enter into interest rate transactions for speculative or trading purposes. 45 Table of Contents
We manage commodity price risk by attempting to pass changes in the cost of these input materials through to our customers. If our efforts to manage commodity price risk are unsuccessful, the operating revenues and earnings of our Manufacturing and Plastics segment could be impacted.
We manage commodity price risk by attempting to pass changes in the cost of these input materials through to our customers. If our efforts to manage commodity price risk are unsuccessful, the operating revenues and earnings of our Manufacturing and Plastics segments could be impacted.
Holding other variables constant, a ten percent change in energy prices would have had an approximate $0.9 million impact on the fair value of these instruments. Our Manufacturing and Plastics segment businesses are exposed to market risk arising from changes in commodity prices for certain raw material inputs, including steel, aluminum and PVC and other plastic resins.
Holding other variables constant, a ten percent change in energy prices would have had an approximate $1.5 million impact on the fair value of these instruments. Our Manufacturing and Plastics segment businesses are exposed to market risk arising from changes in commodity prices for certain raw material inputs, including steel, aluminum and PVC and other plastic resins.
All of our outstanding long-term debt obligations as of December 31, 2024 and 2023 had fixed interest rates and were not subject to material interest rate risk.
All of our outstanding long-term debt obligations as of December 31, 2025 and 2024 had fixed interest rates and were not subject to material interest rate risk.
OTP's exposure to price risk for these commodities is largely mitigated by the current ratemaking process and regulatory framework, which generally allows recovery of purchased power and fuel costs from our electric customers.
OTP's exposure to price risk for these commodities is largely mitigated by the current rate-making process and regulatory framework, which generally allows recovery of purchased power and fuel costs from our electric customers.
Interest Rate Risk Our exposure to interest rate risk arises from our outstanding short-term debt which is subject to variable rates of interest based on benchmark interest rates, primarily SOFR, and our cash equivalent investments, which earn income at a rate that fluctuates daily, based on changes in U.S. treasury rates.
Interest Rate Risk Our exposure to interest rate risk arises from our outstanding short-term debt which is subject to variable rates of interest based on benchmark interest rates, primarily the secured overnight financing rate (SOFR), and our cash equivalent investments, which earn income at a rate that fluctuates daily, based on changes in U.S. treasury rates.
As of December 31, 2024 and 2023, we had $69.6 million and $81.4 million of short-term debt outstanding. Holding other variables constant, a 100 basis point change in interest rates during 2024 would have had an approximate $0.4 million impact to interest expense in 2024 based on our average outstanding short-term debt during the year.
As of December 31, 2025 and 2024, we had $60.2 million and $69.6 million of short-term debt outstanding. Holding other variables constant, a 100-basis point change in interest rates during 2025 would have had an approximate $0.3 million impact to interest expense in 2025 based on our average outstanding short-term debt during the year.
As of December 31, 2024 and 2023, we had $282.0 million and $219.7 million invested in cash equivalent investments. Holding other variables constant, a 100 basis point change in the average interest rates during 2024 would have had an approximate $2.3 million impact to our investment income in 2024, based on our average outstanding investment balance during the year.
As of December 31, 2025 and 2024, we had $372.4 million and $282.0 million invested in cash equivalent investments. Holding other variables constant, a 100-basis point change in the average interest rates during 2025 would have had an approximate $2.8 million impact on our investment income in 2025, based on our average investment balance during the year.

Other OTTR 10-K year-over-year comparisons